11

Production

Activity (p. 127)

Answers are likely to consider a range of factors such as:
l cheaper labour costs in China, Brazil, India, Malaysia and Mexico than in the USA
(Apple and Amazon) and in Japan (Sony and Nintendo)
l specialisation and mass production at the Foxconn plants helping to achieve huge
economies of scale, further reducing the average costs of production for Apple,
Sony, Amazon and Nintendo
l Apple, Sony, Amazon and Nintendo choosing to locate production near their
growing customer base (from China, Brazil and India).

Exam practice (p. 129)

1 Labour-intensive production occurs in industries where the cost of labour is
proportionately higher than other factors of production. Examples include
education and legal services.
20000
2 Firm As labour costs account for 50% of its total costs, whereas Firm
40000
40000
Bs labour costs only account for 40% . Hence, labour costs account for
100000
a larger proportion of total costs at Firm A, so it is more labour intensive.
Award 12 marks for a brief explanation that shows some understanding of
labour intensity.
Award 34 marks for a detailed explanation that uses the data to demonstrate an
understanding of labour intensity.

Exam practice (p. 130)

1 Benefits of capital-intensive technologies include:
l There are potentially huge cost savings in the form of technological economies
of scale for firms that provide such educational services, e.g. video conferences
for teacher training can reach a large audience at minimal cost.
l Such technologies can also make access to education easier for many people,
e.g. the use of e-books is generally cheaper than buying physical textbooks.
l Productivity can improve, e.g. the use of laptops, data projectors and the
internet have transformed how teaching and learning takes place in the
classroom.
Accept any other reasonably outlined benefit, in the context of the question.
2 There are potential advantages in using more technology in education, such as:
l lower average costs in the long run (economies of scale), partly due to the
higher productivity that technology can bring about
l an increase in learning opportunities, e.g. students can use a variety of ways to
present their answers/homework
l interactive teaching and learning, through the use of technology, making
education more accessible, relevant and fun for learners
l learning opportunities for students from around the world, that dont require
students to physically leave their homes.

Cambridge IGCSE and O Level Economics Hodder & Stoughton 2013 1

 11 Production

Despite the potential advantages, the drawbacks of using technology include:

l the loss of the opportunity for teachers to provide effective, two-way, face-to-
face feedback
l the loss of the benefits of social interactions between teacher and students
l the loss of the benefits of social interactions between students and their peers
l the problems if/when there are technological glitches or breakdowns, e.g.
corrupt files, no internet access or crashed computers
l the health implications of the loss of social interactions with others and
opportunities for physical activities such as sports, dance and drama
productions.
Award 12 marks for a limited response that shows minimal understanding.
Award 35 marks for a one-sided argument or an answer with sufficient detail in
places.
Award 68 marks for a balanced answer that considers both the merits and
drawbacks of using technology to replace the traditional labour-intensive nature
of teaching and learning. There must be a reasoned judgement made for full
marks.

Exam practice (p. 132)

1 l Sales per worker at Charnley Realty = $3.95m 8 = $493750 per sales person
l Sales per worker at Tsang Realty = $3.8m 10 = $380000 per sales person
l Thus, the sales team at Charnley Realty is more productive as the average sales
person sells an extra $113750 worth of real estate.
2 Although Charnley Realty has higher productivity as measured by sales per worker
(see above), Tsang Realty might be considered to be more productive as each sales
staff sold a greater number of units in the same time:
l Charnley Realty sold 1.25 properties with eight workers (ten properties sold
between eight sales staff).
l Tsang Realty sold 1.4 properties in the same time period with ten workers (14
properties sold between ten sales staff).
Thus, the choice of measurement of productivity can determine how efficient
firms are interpreted to be.
Award 12 marks for a limited response that shows some understanding.
Award 34 marks for a detailed commentary of the potential difficulty in
measuring or comparing (classifying) productivity.

Exam practice (p. 133)

1 Market share refers to a firms sales revenues as a proportion of the
industrys sales revenues, i.e. it is a measure of a firms size, market power or
competitiveness in relation to all others in the industry.
2 Productivity is important for the survival of firms such as Kodak because:
l A lack of productivity causes average costs to rise and thus reduces the
profitability and likelihood of survival of the firm.
l High productivity helps firms such as Kodak to achieve economies of scale,
thus improving their competitiveness, profitability and chance of survival.
Accept any other reasonable explanation of why productivity is important for the
survival of firms such as Kodak.

Activity (p. 133)

Students own answers. The suggestions could be used for a classroom display, or
even be forwarded to the Senior Leadership Team at the school.

Cambridge IGCSE and O Level Economics Hodder & Stoughton 2013 2