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6. Production and Division of Labour

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Chapter 6 : main menu

6.1 ProductionConcept Explorer 6.1

Theory in Life 6.1

Progress Checkpoint 1

6.2 Division of labourConcept Explorer 6.2

Progress Checkpoint 2

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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?

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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.

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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.

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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?

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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.

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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)

1980 Primaryproduction

1.5%

Secondaryproduction

50.1%

Tertiaryproduction

48.4%

2000 Primaryproduction

0.3%Secondaryproduction

16.2%Tertiaryproduction

83.5%

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Theory in Life 6.1

Contribution to the total value of output by the three types ofproduction in Hong Kong(Source : Hong Kong 2001, Information Services Department of the HKSAR government)

1980 Primaryproduction

1.0%Secondaryproduction

31.6%Tertiary

production67.4%

2000 Primaryproduction

0.1%

Tertiaryproduction

85.6%

Secondaryproduction

14.3%

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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.

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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

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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 A Firm B

Number of workers employed 100 80

Number of working hours per worker 8 12

Total output (units) 1 600 1 800

– Does it mean that more labour is employed by Firm A? Which firm has a higher average labour productivity?

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Concept Explorer 6.2 Labour is not the same as worker. Labour refers to the physical and mental effort provi

ded 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 ofworkers employed

Labour = Number of workinghours per worker

X

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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)

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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

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Concept Explorer 6.2

Firm A’s averagelabour productivity

=1 600

100 x 8= 2 units of output

per man-hour

Firm B’s averagelabour productivity

=1 800

80 x 12= 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.

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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

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Progress Checkpoint 2 The following table shows the production data of

two firms in a month :

Firm A Firm B

Number of workers employed 16 20Average number of working hours of workers 10 7

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.

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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 !!

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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.

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End of Chapter 6