1.4 PRODUCTION & SPECIALISATION
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This video is relevant for this section despite it saying that it is for AQA.
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Production & Productivity
Production is the process of converting inputs into outputs. The inputs will be the factors of production (land, labour and capital with the entrepreneur combining these 3) and the outputs will be goods and services. Firms will always try to increase their productivity as this allows them to produce a greater number of goods and services for the same level of inputs, meaning that they can increase their output. This reduces the firm’s unit cost.
Productivity is an important aspect in relation to the growth of an economy. This will be discussed in macroeconomics (unit 2) in more detail but it is always beneficial to be aware of it and understand the interconnectedness of microeconomics and macroeconomics. Growth can come from two ways. You either work your factors of production harder i.e. use more resources, make labour work longer etc… or productivity rises, whereby your factors of production work the same amount but produce more; this can occur through training or investment. Growth in productivity will allow more to be produced from the same level of inputs and can occur through various ways such as investment, innovation and training. Growth through productivity is really what an economy should be aiming for because the country’s workers will not want to work longer, as that leaves workers with less leisure time and we don’t want to exhaust all of our resources in pursuit of growth. Growth in productivity needs to be monitored by authorities such as the government and the Bank of England. At the moment the UK economy is seeing very low productivity in comparison to the trend rate in productivity growth. This is known as the productivity puzzle and will be explored in more detail in econ 2 (and 4).
Production is the process of converting inputs into outputs. The inputs will be the factors of production (land, labour and capital with the entrepreneur combining these 3) and the outputs will be goods and services. Firms will always try to increase their productivity as this allows them to produce a greater number of goods and services for the same level of inputs, meaning that they can increase their output. This reduces the firm’s unit cost.
Productivity is an important aspect in relation to the growth of an economy. This will be discussed in macroeconomics (unit 2) in more detail but it is always beneficial to be aware of it and understand the interconnectedness of microeconomics and macroeconomics. Growth can come from two ways. You either work your factors of production harder i.e. use more resources, make labour work longer etc… or productivity rises, whereby your factors of production work the same amount but produce more; this can occur through training or investment. Growth in productivity will allow more to be produced from the same level of inputs and can occur through various ways such as investment, innovation and training. Growth through productivity is really what an economy should be aiming for because the country’s workers will not want to work longer, as that leaves workers with less leisure time and we don’t want to exhaust all of our resources in pursuit of growth. Growth in productivity needs to be monitored by authorities such as the government and the Bank of England. At the moment the UK economy is seeing very low productivity in comparison to the trend rate in productivity growth. This is known as the productivity puzzle and will be explored in more detail in econ 2 (and 4).
Specialisation and the Division of Labour
Division of labour is a process that splits down production into many separate smaller tasks, with each task being performed by a separate worker or a group of workers. By breaking down the production process into separate smaller tasks, it allows for specialization and this makes workers more efficient. Also, specialization reduces the skills required by each worker, as they have fewer jobs to master, meaning employers can pay workers a lower wage. Also, the workers tend to master the task that they have been assigned and they increase their output per hour. This results in lower production costs and a cheaper final good. For example, when you go to a restaurant there will be various different job rolls that will be performed by different individuals.
The first task would be the meet and greeter who will greet you and then take you to your table. Then you may have someone from the bar who comes over and takes your drink orders. After this, you will have a waiter who will take you food orders. Then chefs in the kitchen will make your meal and then your waiter will bring it out. When you have finished your meal, your waiter will clear the table and then a washer-upper will clear all of the plates ready for the next day. Imagine how much longer it would take if the same meal was conducted by one person. A 45-minute meal carried out by many workers doing different tasks may take a couple of hours if one worker did them all.
As the workers always carry out one task it gives them time to experiment and discover new and better ways of doing things. This innovation in the production process can increase output and save the firm money. However, there are a few drawbacks of division of labour. One is that if a worker is carrying out a very competitive job all day every day, they are likely to become bored and disinterested with the work. This leads to a drop in motivation and pride in their work, which can result in a fall in output and quality. Dissatisfied workers also tend to be less punctual and they may even choose to leave their job and look for a new one, which may increase labour turnover for the firm. A higher level of labour turnover is expensive, as firms have to spend time and resources looking for and training new workers.
It is hard to say when division of labour started but it can be dated back to prehistoric groups whereby the men in the group would go out and hunt and the females had the cooking and bringing up the children duties. Then the agricultural revolution came. By moving from a nomadic to a settled agricultural lifestyle, farmers were able to produce food surpluses (where more food was being produced per person than the group needed to survive). Then during the industrial revolution more and more emphasis was being placed on the production process and division of labour.
Division of labour is a process that splits down production into many separate smaller tasks, with each task being performed by a separate worker or a group of workers. By breaking down the production process into separate smaller tasks, it allows for specialization and this makes workers more efficient. Also, specialization reduces the skills required by each worker, as they have fewer jobs to master, meaning employers can pay workers a lower wage. Also, the workers tend to master the task that they have been assigned and they increase their output per hour. This results in lower production costs and a cheaper final good. For example, when you go to a restaurant there will be various different job rolls that will be performed by different individuals.
The first task would be the meet and greeter who will greet you and then take you to your table. Then you may have someone from the bar who comes over and takes your drink orders. After this, you will have a waiter who will take you food orders. Then chefs in the kitchen will make your meal and then your waiter will bring it out. When you have finished your meal, your waiter will clear the table and then a washer-upper will clear all of the plates ready for the next day. Imagine how much longer it would take if the same meal was conducted by one person. A 45-minute meal carried out by many workers doing different tasks may take a couple of hours if one worker did them all.
As the workers always carry out one task it gives them time to experiment and discover new and better ways of doing things. This innovation in the production process can increase output and save the firm money. However, there are a few drawbacks of division of labour. One is that if a worker is carrying out a very competitive job all day every day, they are likely to become bored and disinterested with the work. This leads to a drop in motivation and pride in their work, which can result in a fall in output and quality. Dissatisfied workers also tend to be less punctual and they may even choose to leave their job and look for a new one, which may increase labour turnover for the firm. A higher level of labour turnover is expensive, as firms have to spend time and resources looking for and training new workers.
It is hard to say when division of labour started but it can be dated back to prehistoric groups whereby the men in the group would go out and hunt and the females had the cooking and bringing up the children duties. Then the agricultural revolution came. By moving from a nomadic to a settled agricultural lifestyle, farmers were able to produce food surpluses (where more food was being produced per person than the group needed to survive). Then during the industrial revolution more and more emphasis was being placed on the production process and division of labour.