1.1.3 Factors of production Flashcards
What are factors of production?
The inputs needed for creating a good or service.
(Land, Labour, Capital and Enterprise)
What are the four factors of production?
- Land
- Labour
- Capital
- Enterprise
[Define as a factor of production]
Land
(What is it? | What is the factor payment?)
Land is all the natural resources available to us for production.
- Nearly all of the things that fall under the category of “land” are scares – there aren’t enough natural resources to satisfy the demands for everyone.
Factor payment: Rent
[Define as a factor of production]
Labour
Labour is the human input into the production process.
- The population who are available to do work are called the labour force.
Factor payment: Wages
[Define as a factor of production]
Capital
Capital is the equipment, factors and schools that help to produce goods or services.
It is different from land because capital has to be made first.
- Much of an economy’s capital is paid for by the government – e.g. a country’s road network is a form of capital.
Factor payment: Interest
[Define as factor of production]
Enterprise
Enterprise refers to the people (entrepreneurs) who take risks and create things from the other three factors of production.
- They set up and run businesses using any of the factors of production available to them. If the business fails, they can lose a lot of money. But if the business succeeds, the reward for their risk-taking is profit.
Factor payment: Profit
What is geographical mobility?
How easy production can move from one area to another.
E.g. How easy is it for someone living in Nottingham to work for a firm in Cardiff?
What is occupational mobility?
How well production can move from one job to another.
E.g. How well a machine can move from making shoelaces to making flapjacks?
Product vs Production vs Productivity
Product = What is made (output).
Production = Turning inputs into outputs.
Productivity = Output per unit of input. - This can apply to machinery or labour.
what is the reward for the factors of production
Land = rent
Labour = wages
Capital = interest
Enterprise = profit
what is a consumer good
Consumer goods are goods that are demanded and bought by households and individuals.
what is a capital good
Capital goods are any tangible asset used by a business to produce goods or services for consumer goods or for use by other businesses
