6.00 UNDERSTAND ECONOMICS TRENDS AND COMMUNICATION.

6.01 Analyze cost/profit relationships to guide business decision-making.

5-161 5-164 DEFINITIONS

Specialization of labor: People work at one part of the assembly or

service The person becomes an expert and very

efficient at doing the work Specialization by trade or profession Specialization by stage of production:

Division of labor: Specialization by task (a particular part of a

job)

DEFINITIONSDepth of jobs: Defined as the amount of control you have over

the tasks that you do Low depth: There are strict guidelines you must follow,

and you make very few decisions. High depth: You follow general guidelines and set your

own pace.

Scope of jobs: Defined as the number of different operations you

do on the job and the frequency with which you do them The lower your task level, the lower the scope of the

job Low scope: The job is to put doors on cars on an assembly line. Higher scope: The job is to put doors on cars, put seats in cars,

and check the steering mechanism.

SPECIALIZATIONDescribe how resources are involved in

specialization. Natural resources: We locate businesses where they

can be the most successful (e.g., ski lodge in the mountains close to the slopes, orange groves in states with warm climates.

Capital goods: Specialized capital goods contribute to increased production (e.g., use of robots on assembly lines).

Human resources: This occurs when people use their different skills and abilities in jobs for which they are best suited. People should do what they do best so that the most goods and services can be produced.

SPECIALIZATIONIdentify forms of specialization of human

resources. Describe specialization by trade or profession.

This is the type of work you perform to earn a living (e.g., teachers, farmers, doctors, plumbers, artists, etc.).

Describe specialization by stage of production. This form occurs when more than one state of production is

needed to change a raw material into a finished product. The process of making the best use of labor resources in the production of goods and services One person assembles the parts of a car door another person

attaches it to the car frame, another checks it for proper movement Adam Smith – straight pins

Describe specialization by task. This form occurs when jobs are so specialized by a worker

does only one small part of the total job (e.g., in a textile mill, one worker cleans wool, another spins it into yarn, another dyes the yarn, and another weaves it into a woolen fabric).

SPECIALIZATIONExplain the relationship between the depth

and scope of a job. The depth of the job measure a worker’s control

over how a job is done The scope of a job refers to how many parts of

the assembly or service the worker is responsible for performing

Describe the advantages of specialization. Simplified worker training Increased employee interest and satisfaction Increased production rates Increased level of skill Increased quality of work Ease of transferring to a similar job

SPECIALIZATION

Explain the disadvantages of specialization.

Increased interdependency Increased boredom on the job Decreased pride in work Decreased morale and enthusiasm for the job Increased chance of obsolescence because of

technological advances High degree of specialization may cause

difficulty transferring or obtaining another job

SPECIALIZATION

Describe ways to overcome the disadvantages of specialization

Job enlargement: Management may combine job tasks to restore wholeness (e.g., instead of limiting salespeople strictly to selling merchandise, their jobs may be enlarged to help with displays, restocking merchandise, etc.).

Job rotation: Managers may also rotate employees periodically so that they learn new job tasks and see how their old tasks relate to the new tasks.

Job enrichment: Managers add interest to a task to increase a job’s depth, allowing workers to make more decision, set their own pace, and supervise others.

Job satisfaction: Managers may ask for and use employee suggestions; allow flexible or alternative work schedules; praise work well done; and provide cash incentives, contests, and bonuses.

5-165 5-166 LABOR VOCABULARY Labor union: Group of employees (can be in

different companies) that do much the same kind of work or are in the same industry that often participate in collective bargaining. A labor union is an organization of wage earners or salary workers established for the purpose of protecting their collective interests when dealing with employers. http://www.referenceforbusiness.com/small/Inc-Mail/Labor-Unions.html#ixzz1gdBQO0Yu

Local: The union in that particular company or area

National: The headquarters of the whole union

LABOR VOCABULARY

Federation: A group of unions or labor organizations that are in some way coordinated or connected. Adds more power to the union because other unions will support an “action.”

Collective bargaining: consists of negotiations between an employer and a group of employees so as to determine the conditions of employment. The result of collective bargaining procedures is a collective agreement. Employees are often represented in bargaining by a union or other labor organization.

LABOR VOCABULARY

Strikes: A work stoppage on the part of the union Picketing: Method employed to raise awareness of

the cause, protesters usually carry signshttp://www.wisegeek.com/what-is-a-picket.htm Boycotts: Stopping the buying of a company’s

products, a strike tool Featherbedding: Adding workers that aren’t needed

to protect jobs (coal man on a diesel train) Lockouts: Company action to stop workers from

coming to work Injunctions: Legal action to stop an action on the

part of the company or the union Strikebreakers: People hired to replace union workers

LABOR UNIONS

Identify reasons that labor unions form. A means of collectively bargaining with employers

for fair wages and decent working conditions Workers feel unfairly treated by management or the

owners Identify types of labor issues.

Safety (working conditions, hours, training, unsafe materials or equipment)

Fair pay (company is making lots of money but pays poor wages)

Classify types of unions. Craft – skilled laborers (carpenters, electricians, etc) Industrial – workers in the same industry regardless

of skill

LABOR UNIONS Describe levels of union organization.

National – headquarters of all the locals State – headquarters for the locals within a single state Local – Regional (think city or part of a city, county)

IN-PLANT LOCAL a union local restricting membership to one specific workplace,

working for one particular employer CITY-WIDE LOCAL

a union local whose jurisdiction is the named city COUNTY-WIDE LOCAL

a union local whose jurisdiction is the named county STATE-WIDE LOCAL

a union local whose jurisdiction is the named state PROVINCE-WIDE LOCAL

a union local whose jurisdiction is the named province REGIONAL-LOCAL

a union local whose jurisdiction is the named region Shop (plant, firm, company) Members (rank and file) http://xpdnc.com/moreinfo/glossary.html

LABOR UNIONS

Describe types of union organization. CLOSED SHOP

all employees are supplied by the labor union exclusively, typically through the hiring hall, and are required to maintain union membership in order to maintain employment

UNION SHOP any employee can be procured from any source and once

hired, the employee is required to maintain union membership in order to maintain employment

AGENCY SHOP any employee may or may not belong to the union

organization, yet all employees are required to pay dues and other fees for the package of services supplied by union organization

OPEN SHOP any employee voluntarily belong to the union and may

voluntarily pay dues and other fees to the union organization

LABOR UNIONS

Describe the collective bargaining process. The company management team negotiates with

union representatives and then puts the agreed upon contract proposal before the membership for ratification If ratified, the contract becomes the new work rules, pay

and benefits for the selected time Collective bargaining is governed by federal and

state statutory laws, administrative agency regulations, and judicial decisions. In areas where federal and state law overlap, state laws are preempted.

http://www.law.cornell.edu/wex/collective_bargaining Explain types of union negotiation strategies.

Sick-out, walk-out, boycotts, picketing, strike, work slow-down

LABOR UNIONS Describe types of management negotiation strategies.

Tying concessions to important give-backs, lockouts, hiring strike breakers, injunctions

Explain the effects of unionism on workers. Workers pay a membership fee and agree to let the

company and union negotiate terms of employment and pay

A level of protection from poor managers Describe the effects of unionism on businesses.

Can negotiate with a few people rather than each employee

Costs tend to rise, but so can productivity Economists who study unions—including some who are

avowedly pro-union—analyze them as CARTELS that raise wages above competitive levels by restricting the SUPPLY of labor to various firms and industries.

http://www.econlib.org/library/Enc/LaborUnions.html

5-167 5-169 DEFINITIONS

Stages of production: Primary production involves the extraction of raw materials

(e.g. coal, iron, agricultural commodities). Raw materials can be: Extracted – e.g. coal, iron ore, oil, gas and stone Harvested / collected – e.g. fish Grown – e.g. timber, cereal crops

Secondary production involves transforming raw materials into goods. There are two main kinds of goods: Consumer goods – e.g. washing machines, DVD players. As the

name implies, these are used by consumers Industrial / capital goods – e.g. plant and machinery, complex

information systems. Industrial and capital goods are used by businesses themselves during the production process

Tertiary production is associated with the provision of services (an intangible product). Firefighters, taxis drivers, lawyers, bankers.

http://tutor2u.net/business/gcse/production_stages.htm

DEFINITIONS

Theory of production: an effort to explain the principles by which a business firm decides how much of each commodity that it sells (its “outputs” or “products”) it will produce, and how much of each kind of labour, raw material, fixed capital good, etc., that it employs (its “inputs” or “factors of production”) it will use.

http://www.britannica.com/EBchecked/topic/477991/theory-of-production

Production function: The production function relates the output of a firm to the amount of inputs, typically capital and labor. Keep in mind that the production function describes technology, not economic behavior.

http://www.econmodel.com/classic/terms/prodfcn.htm

DEFINITIONS

Increasing returns: Adding resources or workers will result in an increasing ratio of product (marginal return)

Diminishing returns: Adding resources or workers will result in an decreasing ratio of product (marginal return)

Law of diminishing returns: When increasing amounts of one factor of production are employed in production along with a fixed amount of some other production factor, after some point, the resulting increases in output of product become smaller and smaller. (Tomato/fertilizer example)http://www.auburn.edu/~johnspm/gloss/diminishing_returns_law_of

DEFINITIONS

Law of variable proportions: states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline.http://www.trcollege.net/articles/92-law-of-variable-proportions

Marginal product negative returns: in all productive processes, adding more of one factor of production, while holding all others constant, will at some point yield lower per-unit returnsSamuelson & Nordhaus. Microeconomics. 17th ed. page 110. McGraw Hill

2001

DEFINITIONS

Marginal cost: The marginal cost of an additional unit of output is the cost of the additional inputs needed to produce that output.http://www.econmodel.com/classic/terms/mc.htm

Total revenue: The revenue received by a firm for the sale of its output. Total revenue is one two bits of information a firm needs to calculate economic profit, the other is total cost. In general, total revenue is the price times quantity--the price received for selling a good times the quantity of the good sold at that price.http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=total+revenue

Marginal revenue: The change in total revenue resulting from a change in the quantity of output sold. Marginal revenue indicates how much extra revenue a firm receives for selling an extra unit of output. It is found by dividing the change in total revenue by the change in the quantity of output. http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+revenue

PRODUCTION

Explain the stages of production. In Stage I, marginal product is positive and

increasing. In Stage II, marginal product is positive, but decreasing. And in Stage III, marginal product is negative.

http://glossary.econguru.com/economic-term/stages+of+production

Stage I - companies will see increased productivity, or output, with each addition of a non-fixed variable. For example, if the fixed variable is property, a non-fixed variable might be the addition of new employees.

Stage II - This is the stage that all companies strive for. Here, a business will be able to optimize its output. Economists say this is stage in which "rational" firms should operate.

The last stage of production is where the economic phenomenon referred to as "the law of diminishing returns" appears.

http://www.ehow.com/list_6366891_stages-production-economics.html#ixzz1gifAcKCk

PRODUCTION

Describe the impact of the law of diminishing returns on production decisions. More work and resources result in less production per

unit Explain how total revenue and marginal revenue are

used to determine the amount of output that will generate the most profit. Total revenue is all the income generated by selling the

products the company makes Marginal revenue is how much money an additional item

will produce after it is sold. Marginal revenue helps the company calculate whether to make

a few more items Marginal revenue is the extra revenue generated when a firm

sells one more unit of output. It plays a key role in the profit maximizing decision of a firm relative to marginal cost.

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+revenue

TOTAL REVENUE AND MARGINAL REVENUE

The marginal revenue received by a firm is the change in total revenue divided by the change in quantity, often expressed as this simple equation:

marginal revenue = change in total revenue change quantity