1.2 Production Flashcards
what are Factors of production
Scarce resources are used up in the production of goods and services that satisfy human needs and wants.
Land
Natural resources used up in production
Labour
Physical or mental effort put in by an individual to produce a good or provide a service.
Capital
Man-made resources that help produce goods and services
Enterprise
Ability to bring all these factors together to set up a firm. People who do this are called entrepreneurs.
Firm
An organization that employs resources to produce and supply goods and services.
Definition of rewards of factors of production
Payments different factors of production require and receive in order to participate in productive activity
Wages
The reward for labour - People supply their labour to firms in return for a payment in wages. Could be paid per hour of labour, week, etc or for every task they complete.
Rent
The reward for land - Owners of the land require the payment of rent to supply these resources to firms.
Interest
Interest is paid to the people and organizations that supply or invest capital in firms.
Profit (reward)
The reward for entrepreneurs for successfully organizing production in a firm.
Mobility
The ease with which resources or factors of production can be moved from one productive activity to another without incurring significant costs or a loss of output.
Occupational Mobility
Ability to move factors between different productive tasks
Geographical Mobility
Ability to move factors of productions to different locations.
What is profit (of a firm)
It is the surplus revenue, after deducting all the costs.
