2. 1 6.Production and Division of Labour

3. 2 Chapter 6 : main menu 6.1Production Concept Explorer 6.1 Theory in Life 6.1 Progress Checkpoint 1 6.2Division of labour Concept Explorer 6.2 Progress Checkpoint 2

4. 3 Concept Explorer 6.1 A publishing company purchases paper from a paper-producing firm. Then, it prints calendars by using printing machines. What are the capital, semi-finished and finished goods in this production process?

5. 4 Concept Explorer 6.1 The calendars are the finished good. This is because they are the final products of the whole production process. The printing machines are the capital goods, becuase they are used to assist the production of other goods (i.e. the calendars). The capital goods have NOT become part of the final products.

6. 5 Concept Explorer 6.1 The paper purchased from the paper-producing company is the semi-finished good. This is because it is the intermediate product of the paper-producing company, and has become part of the final products. Both the capital and semi-finished goods are regarded as the inputs of the production process.

7. 6 Theory in Life 6.1 It is said that in Hong Kong, primary production is not important, secondary production is declining yet tertiary production is expanding. Is this claim supported by facts and data?

8. 7 Theory in Life 6.1 We can examine the relative importance of the three types of production in terms of : the employment of workforce in each type, and the contribution of each type to the total value of output.

9. 8 Theory in Life 6.1 Employment by the three types of production in Hong Kong (Source : Hong Kong 2001, Information Services Department of the HKSAR government)

10. 9 Theory in Life 6.1 Contribution to the total value of output by the three types of production in Hong Kong (Source : Hong Kong 2001, Information Services Department of the HKSAR government)

11. 10 Theory in Life 6.1 In terms of contribution to employment and total value of output, primary production was insignificant in both 1980 and 2000. For secondary production, this sector was the largest employer in 1980. But owing to the relocation of manufacturing industries to Mainland China, it became less significant in 2000. Tertiary production was the major economic activity in providing employment and contributing to total value of output in 2000. These show that the Hong Kong economy has experienced a structural change from secondary to tertiary production.

12. 11 Progress Checkpoint 1 Classify each of the following into primary, secondary or tertiary production. The West Rail is built by the Kowloon-Canton Railway Corporation. A salesman explains how to operate an MP3 player to a customer. Wool is obtained from sheep by a farmer. Secondary production Tertiary production Primary production

13. 12 Concept Explorer 6.2 Measurement of labour and average labour productivity According to the following table, Firm A employs more workers than Firm B. Firm AFirm B Number of workers employed 10080 Number of working hours per worker 812 Total output (units) 1 6001 800 –Does it mean that more labour is employed by Firm A? Which firm has a higher average labour productivity?

14. 13 Concept Explorer 6.2 Labour is not the same as worker. Labour refers to the physical and mental effort provided by workers in production. It is measured in terms of man-hour, i.e. one unit of labour means one working hour. The quantity of labour employed by a firm is found by : Number of workers employed Labour = Number of working hours per worker X

15. 14 Concept Explorer 6.2 Firm A / B employs more labour. Labour employed in Firm A =100 x 8 =800 (units) Labour employed in Firm B =80 x 12 =960 (units)

16. 15 Concept Explorer 6.2 Average labour productivity refers to : the output level per unit of labour in a time period Average labour productivity = Total units of output Total units of labour employed

17. 16 Concept Explorer 6.2 Firm As average labour productivity = 1 600 100 x8 = 2 units of output per man-hour Firm Bs average labour productivity = 1 800 80 x12 = 1.875 units of output per man-hour As Firm A produces more / less output from a unit of labour, it has a lower / higher average labour productivity.

18. 17 Concept Explorer 6.2 Average labour productivity can also be measured in terms of : the value of output per unit of labour in a time period Average labour productivity = Total value of output Total units of labour employed

19. 18 Progress Checkpoint 2 The following table shows the production data of two firms in a month : Firm AFirm B Number of workers employed 1620 Average number of working hours of workers 107 Total value of output $350 000$280 000 (a)Which firm employs more workers? (b)Which firm has a higher average labour productivity? (c)Explain TWO possible reasons why the firm you answered in (b) has a higher average labour productivity.

20. 19 Progress Checkpoint 2 (a)Firm A / B employs more workers. (b) Labour employed by Firm A = 10 hours x 16 = 160 hours Labour employed by Firm B = 7 hours x 20 = 140 hours Average labour productivity of Firm A = $350 000 160 =$2 187.5 Average labour productivity of Firm B = $280 000 140 =$2 000 HIGHER !!

21. 20 Progress Checkpoint 2 (c)This is because Firm A may adopt division of labour : If the workers are assigned the tasks which they are good at, their productivity will be lower / higher. More / Less time is required in training the workers when they are assigned different tasks.

22. 21 End of Chapter 6