Chap 21

Question 1

The type of factors of production employed is influenced by:

Answer 1

1. The type of product produced
2. The productivity of the factors
3. Their cost.

Question 2

Define corporation tax

Answer 2

a tax on profits of a company

Question 3

Factors influencing demand for capital goods:

Answer 3

1. Price of capital goods; occurs if the factors are substitutes
2. Price of other factors of production
3. Profit levels
4. Corporation tax: cut lets firms plough back the available profit
5. Income
6. Interest rates: more consumption & less risk of investing
7. Confidence levels
8. Advances in technology

Question 4

Factors influencing demand for land

Answer 4

1. Productivity: most fertile land will be in highest demand and receive the highest rent
2. As countries become richer, they make heavier demands on scarce water supplies

Question 5

Reasons why some producers use labour-intensive methods of production

Answer 5

1. Large supply of labour in the country, making labour relatively cheap
2. Some producers may be too small to take advantage of capital equipment
3. Workers can be more flexible in terms of what they do
4. Size of the labour force can be adjusted by small amounts
5. Can provide feedback on how to improve production methods and the quality of products
6. if the price of capital increases
7. If labor can carry out the same functions with the same level of productivity

Question 6

Reasons why some producers use capital-intensive methods of production

Answer 6

1. Advances in technology tend to make capital goods more affordable and more productive.
2. Having the capacity to produce more products at a lower average cost (technical economies)
3. Produce products of a uniform standard unaffected by human error.
4. Do not engage in industrial action.
5. Do not have time off ill and are not affected by tiredness

Question 7

production and productivity

Answer 7

If output per worker hour increases and the number of working hours stays the same, production will increase.

It is possible, however, that productivity could rise and production could fall. This could occur if unemployment increases.

Rise in unemployment may increase productivity as it is the most skilled workers who are likely to keep their jobs.

As economies develop, both production and productivity tend to increase due to advances in technology and improvements in education. These developments can result in productivity rising so much that total output can increase while the number of working hours declines.

Question 8

Productivity

Answer 8

total output divided by the number of workers