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Production and Efficiency . Content. Specialisation Division of labour Exchange Production and productivity Economies of Scale Economic Efficiency . Specialisation.

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Presentation Transcript
  • Specialisation
  • Division of labour
  • Exchange
  • Production and productivity
  • Economies of Scale
  • Economic Efficiency
  • Specialisation occurs when a business focuses on producing a limited number of goods and leaves the production of other goods to other businesses.
  • Specialisation can also occur by:
    • Region e.g. Sheffield and steel
    • International e.g. coffee and brazil
division of labour
Division of Labour
  • The division of labour is where workers concentrate on a performing a few tasks and then exchange their output for other goods and services
advantages and disadvantages of specialisation to a business

As workers specialise they become quicker at producing goods, this reduces costs of production

Level of production increases

Workers are able to develop expertise


Increased costs of training workers

May be a decrease in quality as workers are bored by doing the same job

Advantages and Disadvantages of Specialisation To A Business
advantages and disadvantages of specialisation to workers

Improve their skill level and expertise

Receive more money as they do a more specialised job


Boredom due to monotony of job

Quality of work and skills may suffer due to boredom

Workers could be replaced by machinery

Advantages and Disadvantages of Specialisation to Workers
  • As you specialise you only produce a fixed amount of products
  • In order to get all of the products that you require you need to exchange goods / services with other businesses / individuals
  • By exchanging products you can ensure that you fulfil your needs and wants
production and productivity
Production and Productivity
  • Production is the process of creating, growing, manufacturing, or improving goods and services.
  • Productivity measures the efficiency or rate of production. It is the amount of output (e.g. number of goods produced) per unit of input (e.g. labor, equipment, and capital).
  • Labour productivity measures the amount of output per worker
factors that influence productivity
Factors That Influence Productivity
  • Technology
  • Skills and experience of the labour force
  • Motivation
  • Quality of factors of production
  • Division of labour
  • Investment
economies of scale
Economies of Scale
  • These occur when mass producing a good results in lower average cost.
  • Average costs fall per unit – Average costs per unit = total costs / quantity produced
  • Economies of scale occur within an firm (internal) or within an industry (external).
internal and external economies
Internal and External Economies
  • Internal Economies of Scale

As a business grows in scale, its costs will fall due to internal economies of scale. An ability to produce units of output more cheaply.

  • External Economies of Scale

Are those shared by a number of businesses in the same industry in a particular area.

external economies of scale
External Economies of Scale
  • These are advantages gained for the whole industry, not just for individual businesses.
examples of external economies
Examples of External Economies
  • As businesses grow within an area, specialist skills begin to develop.
  • Skilled labour in the area – local colleges may begin to run specialist courses.
  • Being close to other similar businesses who can work together with each other.
  • Having specialist supplies and support services nearby.
  • Reputation
diseconomies of scale
Diseconomies of Scale
  • Occur when firms become too large or inefficient
  • Average costs per unit start to rise
economies of scale and monopolies
Economies of Scale and Monopolies
  • Economies of scale can lead to the development of monopolies as larger businesses are able to exploit lower unit costs and therefore make more profits
economies of scale18
Economies of Scale
  • Minimum efficient scale – where an increase in the scale of production gives no benefits to a reduction in unit costs
  • Minimum efficient plant size – where an increase in the scale of production of an individual plant within the industry doesn’t result in any unit cost benefits
economic efficiency
Economic Efficiency
  • A business is economically efficient if it has selected the combination of factors of production that enable it to produce its current output level at the lowest possible cost
  • Firms are economically efficient if they are able to create large consumer and producer surpluses
economic efficiency20
Economic Efficiency
  • Any point on the production possibility frontier is productively efficient
  • Allocative efficiency only occurs if the business is producing goods and services that meet the wants and needs of consumers
  • Specialisation is where you concentrate on the production of a few goods and services
  • Division of labour is where workers specialise in the production of certain goods and services
  • Exchange occurs when specialisation occurs as workers exchange what they have produced for other goods and services
  • Productivity refers to the amount of output created from a set number of inputs
  • Economies of Scale result in lower unit costs as a company grows in size
  • Economic Efficiency occurs where a business can produce its maximum amount with the minimum cost