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, and small versus large

  Firms differ by sector (primary, secondary, tertiary), by ownership (private or public), and by size.

• 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.