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ECONOMICS

ASSIGNMENT
CHAPTER: 17
1. What is production? (Give Example?)
Ans: Production is a process that involves converting resources into goods or
services. These goods and services are provided to satisfy the needs and wants
of people. An example of production is harvesting corn to eat. An example of the
production is the amount of corn produced. The definition.
2. What are the factors of production? (With example & describe)
Ans: The four factors of production are: 1. Land 2. Labour 3. Capital 4. Enterprise
1. Land: The first factor of production is land, but includes any natural
resources used to produce goods and services. This includes not just land,
but also things come from the land. Some common land or natural
resources are water oil, copper, natural gas, coal, and forests, or nonrenewable such as oil or natural gas. The income that resource owner earn
in return for land resources is called rent.
2. Labour: The second factor of production is labour. Labour is the effort that
people contribute to the production of goods and services. Labour
resources include the work done by the waiter who brings tour food at a
local restaurant as well as the engineer who designed the bus that
transport you to school. It includes an artists creation of a painting as well
as the work of the pilot flying the airplane overhead. If you have ever been
paid for a job, you have contributed labour resources to the production of
goods or services. The income earned by labour resources is called wages
and is the largest source of income for most people.
3. Capital: The third factor of production is capital. Think of capital as the
machinery, tools and building humans use to produce goods and services.
Some common example of capital include hammers, forklifts, conveyers
belt, computers, and delivery van. Capital differs based on the worker and
the type of work being done. For example, a doctor may use a stethoscope
and an examination room to provide medical services. Your teacher may
use textbooks, desks and a whiteboard to produce education services. The
income earned by owners of capital resources is interest.
4. Entrepreneurship: The fourth factor of production is entrepreneurship. An
entrepreneurship is a person who combines the other factor of production
land, labour, capital to earn profit. The most successful entrepreneurs
are innovators who find new ways produce goods and services or who
develop new goods and services to bring to market. Without the
entrepreneur combining land, labour and capital in new ways, many of the
innovation we see around us would not exist. Think of the
entrepreneurship of Henry Ford or Bill Gates. Entrepreneurs are a vital
engine of economic growth helping to build some of the largest firms in
the world as well as some of the small businesses in your neighbourhood.
Entrepreneurs thrive in economic where they have the freedom to start
businesses and buy resources freely. The payment to entrepreneurship is
profit.

3) What is labour and capital intensive production? (With example)


Ans: Labour intensive: Labour Industries that produce goods or services requiring
a large amount of labour. Traditionally, labor intensive industries were determined
by the amount of capital needed to produce the goods and services. Examples
of labour intensive industries include agriculture, mining, hospitality and food
service.
Capital intensive: Capital intensive refers to a business process or an industry that
requires large amounts of money and other financial resources to produce a good or service.
... Companies in capital-intensive industries are often marked by high levels of depreciation
and fixed assets on the balance sheets. For example Airlines, auto manufacturers, and
drilling operations are often considered capital-intensive businesses because they require
large amounts of expensive equipment and raw materials to make their products.
Businesses like web site design, insurance, or tax preparation generally depend on labour
rather than physical assets and are thus not considered capital intensive.
Although there is no mathematical threshold that definitively determines whether an industry
is capital intensive, most analysts look to a companys capital expenses in relation to its
labour expense. The higher the ratio between capital and labour expenses, the more capital
intensive a business is. For example, if Company XYZ spent $10,000,000 on equipment in
one year but only $3,000,000 on labour, Company XYZ is probably in a capital-intensive
industry.
CHAPTER: 17
4) Describe the sectors of economics? (With example)
Ans: The three main sectors of the economy are:

Primary sector extraction of raw materials mining, fishing and agriculture.

Secondary / manufacturing sector concerned with producing finished goods, e.g. factories
making toys, cars, food, and clothes.

Service / tertiary sector concerned with offering intangible goods and services to
consumers. This includes retail, tourism, banking, entertainment and I.T. services.
Primary sector
The primary sector is sometimes known as the extraction sector because it involves taking
raw materials. These can be renewable resources, such as fish, wool and wind power. Or it
can be the use of non-renewable resources, such as oil extraction, mining for coal. In the
1920s, over one million people were employed in the UK coal industry. It was a key part of
the economy. However, improved technology and the growth of other energy sources has
seen a dramatic decline in this primary sector industry.

Secondary sector
The manufacturing industry takes raw materials and combines them to produce a higher
value added finished product. For example, raw sheep wool can be spun to form a better
quality wool. This wool can then be threaded and knitted to produce a jumper that can be
worn. Initially the manufacturing industry was based on labour intensive cottage industry
e.g. hand spinning. However, the development of improved technology, such as spinning
machines, enabled the growth of larger factories. Benefiting from economies of scale, they
were able to reduce the cost of production and increase labour productivity. The higher
labour productivity also enabled higher wages and more income to spend on goods and
services.
Service / tertiary sector
The service sector is concerned with the intangible aspect of offering services to consumers
and business. It involves retail of the manufactured goods. It also provides services, such as
insurance and banking. In the twentieth century, the service sector has grown due to
improved labour productivity and higher disposable income. More disposable income
enables more spending on luxury service items, such as tourism and restaurants.
5) What is industrialisation? (With example)
Ans: Industrialization is the process by which an economy is transformed from primarily
agricultural to one based on the manufacturing of goods. Individual manual labour is often
replaced by mechanized mass production, and craftsmen are replaced by assembly lines.
Characteristics of industrialization include economic growth, more efficient division of labour,
and the use of technological innovation to solve problems as opposed to dependency on
conditions outside human control.
6) What is the difference between develop and development?
Ans: DEVELOP:
Develop is to Industrialization is the process by which an economy is transformed from
primarily agricultural to one based on the manufacturing of goods. Individual manual labor is
often replaced by mechanized mass production, and craftsmen are replaced by assembly
lines. Characteristics of industrialization include economic growth, more efficient division of
labour, and the use of technological innovation to solve problems as opposed to dependency
on conditions outside human control.
DEVELOPING:
of a nation or geographical area having astandard of living or level of industrialpr

oduction well below that possible withfinancial or technical aid; not yet highly
industrialized:
7) What is fixed cost, variable cost, total cost, profit, total revenue? (With
example)
Ans: Fixed costs are costs that do not change when the quantity of output changes. Unlike
variable, which change with the amount of output, fixed costs are not zero when production
is zero.
Variable costs are those costs that vary depending on a company's production volume; they
rise as production increases and fall as production decreases. Variable costs differ from
fixed costs such as rent, advertising, insurance and office supplies, which tend to remain the
same regardless of production output.
Total Cost the calculation is: (Average fixed cost+ Average variable cost) x Number of units
= Total cost. For example, a company is incurring $10,000 of fixed costs to produce 1,000
units (for an average fixed cost per unit of $10), and its variable cost per unit is $3.
Profits a benefit or gain, usually monetary. An example of profit is the money a business has
left after paying their expenses.
Revenue is the amount of money that a company actually receives during a specific period,
including discounts and deductions for returned merchandise. It is the "top line" or "gross
income" figure from which costs are subtracted to determine net income.
CHAPTER: 18
8) What is economics of scale describe internal economics of scale? (With example)
Ans: Economies of scale arise because of the inverse relationship between the quantity
produced and per-unit fixed costs; i.e. the greater the quantity of a good produced, the lower
the per-unit fixed cost because these costs are spread out over a larger number of goods.
Internal economies of scale are firm-specific, or caused internally, while external economies
of scale occur based on larger changes outside of the firm. Both types result in declining
marginal costs of production; yet, the net effect is the same.
9) What is external economics of scale? (With example)
Ans: External economies of scale occur outside of a firm but within an industry. For example
investment in a better transportation network servicing an industry will resulting in a
decrease in costs for a company working within that industry.

10) What is diseconomies of scale? (With example)


Ans: Diseconomies of scale is an economic concept referring to a situation in which
economies of scale no longer functions for a firm. With this principle, rather than
experiencing continued decreasing costs and increasing output, a firm sees an increase in
marginal costs when output is increased.