1.2 - The Factors of Production Flashcards
What are the 4 factors of production?
Land
Labour
Capital
Enterprise
What are the factors of production?
The scarce resources used in the production of goods and services. Production of goods and services usually requires the use of combination of the factors of production.
What are the definitions of the 4 factors of production?
Labour: Human effort and input (physical and mental) used in the production of goods and services. Labour can be skilled or non skilled productivity based of education training and experience.
Capital: Human made goods or resources used to produce other goods and services
Enterprise: The willingness and ability to bear risk and make decisions in buisness An entrepreneur decides on the combination of the factors of production necessary to produce goods/services with the aim of generating profit
What is Land: Any natural resource used in the production process
What are the examples of the factors of production?
What is Factor mobility?
The ease with which resources can be moved from one productive activity to another without incurring significant cost or a loss of output.
What is occupational mobility?
Occupational mobility factor of production can move through different productive tasks or uses
What is Geographical mobility?
The ability to move factors of production to different places.
What are the main features of labour?
Labour is often one of the most expensive costs of production
If firms can substitute capital (machinery) for labour, productivity often increases & costs decrease
Many firms rely heavily on labour & ensuring labour mobility helps to lower unemployment & reduce worker shortages in an economy
What are the 2 factors that cause labour to be less mobile?
Geographical immobility of labour: This occurs when workers find it difficult to move from one geographical area to another in order to secure employment
Barriers to mobility may include family ties, lack of information about possible jobs
Occupational immobility of labour: This refers to the ability of a worker to change occupations when they lose a job
If their skill base is transferable between different occupations, then their occupational mobility is high
In reality, many workers are not able to easily transfer between occupations & this is a particular issue when an economy is faced with structural unemployment
How do changes in Quantity and Quality affect the various factors
If the quantity or quality of a country’s factors of production change, then the productive potential of the country also changes
If the quantity or quality increases, this corresponds to an outward shift of the potential output of an economy as shown on a production possibilities curve model (see Subtopic 1.4.1). The country is able to produce more
If the quantity or quality decreases, this corresponds to an inward shift of the potential output of an economy as shown on a production possibilities curve model. The country now cannot produce as much as it used to
How can the factor of production quantity be improved for the individual factors?
Land - Fertiliser the ground to kill more chemicals
plant more trees
produce more oil
increase the rent
discover new resources
Labour - Increased jobs and variant of them increase sickness absent
increased immigration
Increase retirement age
pay more money
Capital - Make more machines and greater variety
Increase intrest payments
Enterprise - Increase prices of goods to increase products more firms to start up
Decrease corporation tax
How can the factor of production quality be improved for the individual factors?
Land - More minerals and fertilisers treat the land with more chemicals
Labour - Make education more easy to access and better training qualifications
Capital - More efficent machines
Fund more into tech
Improved speed and accuracy of modern equipment
Enterprise - More and better training for aspiring enterprisers and current ones more encouragement and better education giving more support and help.
What are the general influences on the quality or quantity of the Factors of production available to the economy?
Technological advances - These can often improve the quality of the factors of production
Changes in the cost of production
Changes in relative productivity - Process innovation often results in productivity improvement
Changes in education and skills - Over time this increases the quality of labour in an economy
Changes in government regulations - These can improve the quantity of the factors of production
What are factor rewards?
The payments different factors of production require and recieve in order to participate in productive activity
What are the factors rewards for the 4 factors?
Labour - people will supply their labour to firms in return for payments called wages
Land - Owners of land require payment of rent to supply their resources to their firm
Enterprise - Profit is the surplus left over after all costs have been paid which rewards entrepreneurs for successfully organising production
Capital - Interest is payed to those who invest in capital firms this is what they charge for supplying toe money or machinary
