Firms and production
G3 Economics - syllabus K343, 2027
Types and sizes of firms, mergers, economies of scale, and how firms choose and use factors of production.
- Types of firms: sector and ownership
Firms differ by sector (primary, secondary, tertiary) and by ownership (private or public sector).
- Small and large firms: advantages and disadvantages
Large firms gain lower costs and easier finance but can become slow; small firms are flexible and personal but find it harder to borrow and to cut costs.
- Mergers: horizontal, vertical and conglomerate
A merger joins two firms: at the same stage (horizontal), different stages (vertical), or in unrelated industries (conglomerate).
- Economies and diseconomies of scale
As a firm grows, average cost first falls (economies of scale) and may later rise (diseconomies of scale).
- What affects firms' demand for factors of production
Firms demand more of a factor when demand for their product rises, when the factor is cheaper, available and more productive.
- Labour-intensive and capital-intensive production
Labour-intensive production uses mostly workers; capital-intensive production uses mostly machines.
- Production and productivity
Production is total output; productivity is output per worker or per hour, and investment usually raises it.
- Put it together: How should a bakery chain grow?
A bakery chain with 20 outlets wants to grow. It has three options. Compare the effects on different groups.
What you will be able to do
I can classify firms by sector and ownership, and weigh the advantages of small and large firms.
Syllabus K343, 3.4.1. Different types of firms: primary/secondary/tertiary sector firms; private sector/public sector firms; advantages and disadvantages of small and large firms
Taught in Types of firms: sector and ownership, Small and large firms: advantages and disadvantages
I can define horizontal, vertical and conglomerate mergers and weigh their advantages and disadvantages.
Syllabus K343, 3.4.2. Mergers: definitions, examples, advantages and disadvantages of different types of mergers: horizontal, vertical and conglomerate
I can explain internal and external economies and diseconomies of scale and show them on an average cost diagram.
Syllabus K343, 3.4.3. Economies and diseconomies of scale: how internal and external economies and diseconomies of scale can affect a firm/industry as the scale of production changes; drawing and interpretation of average total cost (ATC) diagrams to illustrate economies and diseconomies of scale
Taught in Economies and diseconomies of scale
I can explain what affects a firm's demand for factors of production.
Syllabus K343, 3.5.1. Demand for factors of production: influences to include demand for the product, the price of different factors of production, their availability and their productivity
Taught in What affects firms' demand for factors of production
I can explain why firms choose labour-intensive or capital-intensive production and weigh each.
Syllabus K343, 3.5.2. Labour-intensive and capital-intensive production: reasons for adopting the different forms of production; advantages and disadvantages of the different forms of production
I can tell production from productivity and explain what changes each, including investment.
Syllabus K343, 3.5.3. Production and productivity: the difference between production and productivity; influences on production and productivity; effects of changes in investment on productivity
Taught in Production and productivity