2.3 Productive Efficiency

Question 1

Define production

Answer 1

The process of turning inputs into outputs

Question 2

Define productivity

Answer 2

Output per worker

Question 3

Give the formula for productivity

Answer 3

Number of Staff

Question 4

It takes a German worker __ days to produce what an English one can in 5

Answer 4

4

Question 5

Define Human Capital

Answer 5

Knowledge and skills embodied in people that raise productivity

Question 6

Define Physical Capital

Answer 6

Tools and machines that make labour more efficient

Question 7

Define efficiency

Answer 7

Using scarce resources in the most economically productive way through reducing costs and maximising human and physical capital

Question 8

Give 6 factors that can increase productivity

Answer 8

• Human Capital
• Physical Capital
• Infrastructure
• Organisation
• Wages
• Workforce Motivation

Question 9

Explain the relationship between productivity and pay

Answer 9

• Improving production adds is likely to lead to an increase in wages
• An increase in wages is likely to lead to an increase in productivity

Question 10

Explain the relationship between productivity and economic growth

Answer 10

• High productivity increases GDP as it allows for business expansion

Question 11

Explain how increased productivity could disadvantage the economy

Answer 11

COuld increase physical capital intensity and make people redundant

Question 12

Explain how productivity creates a competitive advanatge

Answer 12

• Cost per unit will fall which allows for a lower price, providing a more competitive price
• Added profits spent on R&R
• Increased morale will increase the quality of the good or service

Question 13

Define Capital intensity

Answer 13

Using large amounts of capital for production rather than labour

Question 14

Define Labour Intensity

Answer 14

Using a majority of labour for production

Question 15

Give a reason why Capital Intensity may not be suitable for a dynamic market

Answer 15

ore difficult to reprogramme machines than to retrain staff

Question 16

Define capacity utilisation

Answer 16

A measure of the extent to which a business is using its productive potential

Question 17

Give the formula for Capacity Utilisation

Answer 17

Maximum possible output

Question 18

Define Under-Utilisation

Answer 18

Where a firm’s demand is too low and they cannot find enough orders

Question 19

Give 4 possible causes of Under-Utilisation

Answer 19

• Seasonal demand
• New competitors
• Changes in fashion
• Wrong balance of the marketing mix

Question 20

Give 3 benefits of Under-Utilisation

Answer 20

• More time for maintenance and staff training
• Less stress for employees
• Can cope with orders well

Question 21

Give 4 disadvantages of Under-Utilisation

Answer 21

• Higher fixed cost per unit
• Can’t be fixed by lowering the price of the good
• Spare capacity can portray the image of being poor quality
• Staff can become demoralised

Question 22

Give 5 possible solutions of Under-Utilisation

Answer 22

• Try to find a new business
• Rationalisation
• Short-term work
• Redundancies
• Extending the product range

Question 23

Define Rationalisation

Answer 23

Selling off or shutting down parts of a business

Question 24

Define Over-Utilisation

Answer 24

Where a firm is struggling to cope with demand

Question 25

Give 4 causes of Over-Utilisation

Answer 25

- Seasonal demand - Competitor dropping out of the market - Fashion changes - Successful marketing

Question 26

Give a benefit of over-utilisation

Answer 26

Revenue is high

Question 27

Give 3 disadvantages of Over-Utilisation

Answer 27

- Average costs higher than necessary - Efficiency low - The business is not as competitive as it should be

Question 28

Give 4 possible solutions to Over-Utiliastion

Answer 28

- Extra shifts - Temporary staff - Outsourcing or subcontracting - Expansion

Question 29

Define Lean Management

Answer 29

An approach to management that focuses on minimising waste and cost whilst ensuring quality

Question 30

Define Quality Control as a method of production

Answer 30

The traditional method of checking products are adequate to sell after production is finished

Question 31

Define Quality Assurance as a method of production

Answer 31

Ensuring that quality standards are agreed and met throughout the production process

Question 32

Define Total Quality Management as a method of production

Answer 32

Employees all involved in taking responsibility for their team's work

Question 33

Order these 3 methods of production in order of most to least strict (Quality Assurance, Quality Control, Total Quality Management)

Answer 33

Total Quality Management Quality Assurance Quality Control

Question 34

Define Kaizen production

Answer 34

Continuous improvement where the whole company strive for improvements constantly

Question 35

Define lead time

Answer 35

The time it takes for a decision to produce a good to its arrival on the market

Question 36

Give 2 ways in which lean production can lead to a competitive advantage

Answer 36

- Gain a first movers advantage | - Allows an advantage in a price elastic market where they wouldn't be able to otherwise

Question 37

Define 'Just in Time Production'

Answer 37

A stock control system that removes the need to store large quantities of stock

Question 38

Give 5 advantages of 'Just in Time Production'

Answer 38

- Reduced rent costs - Increased capital intensity cuts wages - Less likelihood of stock perishing - Allows adaptation to trend changes - Avoids the buildup of low demand products

Question 39

Give a disadvantage of 'Just in Time Production'

Answer 39

Can't deal with unexpected, high-demand orders

Question 40

How can minimising waste give a business a better perception?

Answer 40

They will have a better reputation which will attract more cutomers

Question 41

How do reduced lead times benefit a business?

Answer 41

Makes the firm more market orientated and allows them to respond to changes in consumer demand