Production and Efficiency

1. Specialisation

Define specialisation

Adam Smith’s Example of Division of Labour (Specialisation) in a Pin Factory

One man draws out the wire, another straightens it out, a third cuts it, a fourth points, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them in to the paper.

Give an example of specialisation by a region

Give an example of specialisation by an economy

What are the costs and benefits of specialisation?

Benefits Costs Productivity Boredom

Training Limited Skills

Lower prices Break down Why is money needed to allow specialisation to take place?

What is production?

What is meant by productivity?

Explain productive efficiency and illustrate it in two ways.

Amazon video on productive efficiency

Production Possibility Frontier. Average Costs ECONOMIES OF SCALE

Aim – To understand economies and diseconomies of scale

1. Define economies of scale

2. Work out the Average cost in the table below

Output (Units) Total Costs (£s) Average Cost (£ per unit)

1000 12000

2000 20000

5000 45000

10000 80000

20000 144000

50000 330000

100000 640000

500000 3000000

3. Explain the following internal economies of scale:

Financial

Technical

Marketing

Managerial

Purchasing 4. Draw a graph showing economies of scale and explain how they may lead to monopoly.

5. Define diseconomies of scale and explain why they might occur.

6. Draw a graph showing diseconomies of scale and explain how they may discourage the growth of firms.

7. Draw a graph showing economies and diseconomies of scale and productive efficiency.