A paving-stone business leases access to a quarry containing stone. The owner used personal savings to establish the business and decides which production method to use. It currently uses Method A.
| Method A | Method B | |
|---|---|---|
| Quarry workers | 20 | 8 |
| Weekly wage cost | £10,000 | £4,000 |
| Cutting machines | 2 | 6 |
| Weekly machinery cost | £3,000 | £9,500 |
| Expected paving stones per week | 800 | 800 |
Wages then rise by 20%, while machinery costs and expected output remain unchanged.
Analyse how the business is likely to change the way it combines the four factors of production following the wage rise.
77 exam-style questions on OCR GCSE Economics 1.1 Main economic groups and factors of production, covering 1.1.1 Role of main economic groups and 1.1.2 Factors of production. Each one has a worked solution and a mark scheme showing where the marks go.