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Year 11 Economics - Flow on effects of change in supply
Terms in this set (8)
Explain possible flow on effects if technology (e.g. machines, wiring supporting machines) fails/breaks down. It could be they are worn out, the wiring is worn out or does not have the capacity to carry the amount of electricity needed for modern machines. Today copper wire is no longer adequate - ultrafast broadband is - this could mean the old wiring needs replacing to allow ultrafast broadband and new modems to work.
• may have to lay off some workers because there are fewer machines able to be used and fewer goods being made.
• Expansion plans may have to be put on hold until the machinery is up to standard.
• The business may have to be shut down if the business fails to recover from the cost of repairing/replacing the machines in the long term.
• The business may have to look for temporary premises if it is no longer able to operate from that site due to failed machinery issues.
• The business might have to concentrate on the type of goods that are less affected by the broken machines as some parts of the factory being unusable. Maybe more hand made goods are produced which could be less volume and takes longer to produce
Customers may cancel future orders as they do not have confidence in the prompt and continuous supply of quality goods
What are possible flow on effects of replacing adult workers by hiring youth workers being paid at the youth cheaper youth wage work
The business's productivity will decrease because the youth workers are less experienced in making goods so will be slower / less efficient / work at a lower production rate take the same number of new workers longer to make the same number of shoes compared to the older, more experienced staff.
This will lead to a decrease in supply of shoes or the initial increase in supply may be offset by a fall in supply
The business's productivity will increase as the new youth workers will be eager to prove themselves worthy of the job and will work extra hard, increased production rate / faster / more efficient / take the same number of new workers less time to make the same number of shoes compared to the older, more experienced staff.
This will result in their producing more in the same amount of time as the old staff. This would lead to a (further) increase in the supply of shoes.
What could be two flow on effects on resources of a fall in the price of providing a service like painting houses?
Flow-on effect on use of resources:
A decrease in price of painting a house will cause a decrease in quantity of houses being painted.
With fewer houses being painted, A businesses need for resources will be less e.g. it may not need as many workers to paint houses as before or it will not need to hire as many scaffolds and ladders
It transfer its resources to a relatively more profitable alternative service e.g Transfer staff to provide gardening services instead of painting.
What would be two flow on effects of good environmental conditions like extra sunshine days in winter have on a business that paints houses
With the fine weather it will be able provide MORE TIME to paint more houses than normal in the winter period
Flow on effects could include
It may need to increase it's advertising so it gets enough clients to make use of the good winter weather
With the increase in the number of houses it is now painting, It may need to hire more workers or casual labour to help it with the work load during this busy time
It may need to divert labour resources from relatively less profitable alternatives - gardening to painting
With the increased number of houses being painted, It may need to source more scaffolding as its present supplier may not be able to fulfil it's scaffolding requirements
It may have to buy scaffolding so it does not need to hire it
It may have to purchase a second van to transport it's increased number of pails of paint, extra workers and other tools
A business offers gardening services as well as house painting services. The local council has introduced stricter safety regulations for painters. This requires painters to use stronger scaffolds and safer ladders and to have them safety checked more regularly
What is the relationship between these goods and explain why they are related?
What has been the effect of these new rules?
What is the impact on the supply of gardening and painting services?
What is the flow on effects of this impact on these services?
House painting and gardening are related goods / services, as they are both outdoor jobs that the business can provide using it's time, and similar resources, such as labour and its van.
These increased legal requirements will increase the cost of production as more expensive equipment (to hire/buy) must be used
With house painting now less profitable, It will devote more of it's time and resources, such as its van, to gardening services. Gardening services will be relatively more profitable than house painting, as it does not have the increased costs associated with safety requirements associated with scaffolds and ladders. Consequently, the supply of gardening services will increase, and the supply curve for gardening services will shift to the right from S to S1. The supply of painting houses services will decrease as costs of production have increased so it is less likely to be as profitable as before with decreased ability to cover production costs. The supply curve will shift to the left from S to S1.
Flow on effects
As the business is now providing gardening services, it's van might not be suitable for the type of equipment it relies on, and consequently, it's van might need to be modified
The business might have to sell redundant painting equipment and purchase more specialised gardening tools with the proceeds
The business will have to change its advertising to attract gardening clients, instead of painting clients.
The business may need to hire workers experienced in gardening, and perhaps make redundant those who are not trained in gardening, or who do not wish to offer gardening services.
Farmers on the Canterbury Plains who are well into lambing are bracing themselves for heavy snow that's been forecast for much of the South Island.
Explain the flow on effects of a snow storm on the costs of producing lambs
An environmental factor such as bad weather causes the supply of lambs to decrease due to increased production costs trying to produce lambs.
The snow will reduce supply of lambs due to the extra costs or stock loss which means lambing will be less profitable as the difference between revenue and increased costs will be smaller.
Flow on effects are
lay off workers - because they are no longer earning enough revenue to pay the workers.
look to borrow to see them through - due to lack of cash in tough times
reduce the size of their farm devoted to sheep to lower levels, since the flock will now be smaller and switch resources to farm other types of livestock - that are not so prone to the weather, eg goats and horses or grow more crops.
postpone expansion plans due to the loss of sales and profit.
Farmers have invested in new computer technology to help to better manage and process its lambs. Farmers expects this will improve productivity on their farms.
Discuss how this new technology might affect the supply of lambs on farms.
• explain the link between new technology and productivity
• explain the link between productivity and supply
• refer to a possible sketch graph
• explain ONE flow-on effect of this change for Farmers.
The new technology/computer system will increase productivity because it means:
• the production process will be more efficient/faster/quicker/have greater speed/save time/fewer mistakes/less human error (NOT: easier or better alone)
• the rate of production will be greater
• be more output per worker/process more lambs in the same time/process same number of lambs in less time/with fewer workers
Greater productivity will increase supply because more lambs can be processed at each price. Costs will fall as savings are made and therefore it will be relatively more profitable to supply lambs.
As a result, the supply curve will increase/shift right from S to S1.
Flow-on effects: Could include - but are not limited to -
Farms finding that with more technology/productivity they:
• can expand operations - because they are earning greater profits and can have funds to expand
• can expand operations - look to exporting overseas or buy more land
• need fewer workers/lay some off - due to new technology replacing them
• need fewer workers/lay some off - which may cost farmers redundancy payments
• can hire more workers skilled in this technology - because the existing workers may not have the skills or need to be retrained
• can hire more workers - especially farm hands or manual labour - to farm the extra sheep being supplied
• can repay debt due to the greater profits from selling more lambs at a lower unit cost.
A business can produce ginger beer or apple juice
Discuss how a decrease in the price of ginger beer might affect the business's supply of apple
In your answer, you should:
• fully explain the relationship between ginger beer and apple juice and how this might affect the business's use of resources
• fully explain how it might impact on the business's supply of apple juice
• explain ONE flow-on effect of this change on the business's operations
Relationship between ginger beer and apple juice:
Ginger beer and apple juice are related goods for this business, in that they are similar / alternative (NOT: Substitute) goods where resources used for the production of one good can also be used for the production of the other. In this case ginger beer and apple juice may use similar resources such as bottles and vats.
Lower prices of ginger beer will mean the business will divert his resources from the production of ginger beer to the production of apple juice, hence increasing supply of apple juice at each and every price. With ginger beer being less profitable, this has made apple juice relatively more profitable than ginger beer, so the business will have an incentive to supply more apple juice. This is shown as a shift of the supply curve of apple juice to the right from S to S1.
A flow-on effect:
Examples include: The business may have to produce new labels for its apple juice bottles / source different ingredients, ie apples for juicing / change its advertising towards apple juice / switch existing workers from ginger beer to apple juice production which may involve retraining workers. If the business's workers are not skilled in apple juice production, it may have to lay off those workers and employ workers specifically trained in apple juice production. It may have to sell off some ginger beer equipment and purchase equipment specific to apple juice production such as a juicing machine (eg the idea of switching resources away from ginger beer to apple production).
THIS SET IS OFTEN IN FOLDERS WITH...
Supply - essential definitions
Year 11 Economics - Changes in Supply
NCEA Level 1 Business Studies
OCR Business Studies - Business & People A292
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