1.3 Factors of production Flashcards
what is a pneumonic to remember the FOP’s
CELL
capital, enterprise, land, labour
What is capital?
Capital are things which are used to make goods and services.
Machinery
Tools
Equipment
What is enterprise?
It is someone willing to take risks in order to make profit
What is land?
Natural resources such as oil, coal, wheat or water. It can also be the physical space for fixed capital
What is labour?
It is human capital, the workforce.
What are the rewards to the FOP’s
capital - interest from investment
enterprise - profit
land - rent
labour - wages
What is specialisation?
It is the concentration of resources on a specific task or product
What are the benefits of specialisation?
QUANTITY, PRODUCTIVITY AND EFFICIENCY INCREASES
- Higher output : production is raised and quality can be improved
- Consumers have more choice : larger range of goods and services produced
- A bigger market : there is more trade and growth because of a higher output
- Economies of scale : An increase in the size of the market leads to a lower unit cost
What are the disadvantages of specialisation?
Makes a firm vulnerable to a change in global demand:
Resources are finite (what happens if they run out?)
National interdependence : (what happens if there is a war?)
What is division of labour?
It is the distribution of workers on specific tasks in the production process
What are the advantages of division of labour?
Can raise productivity
Workers feel valued which raises productivity which lowers the supply cost per unit
Efficient
Workers become more skilled through repetition of tasks
What are the disadvantages of division of labour?
Repetitive work can lower motivation which leads to lower productivity
Workers take less pride in their work as it is repetitive which means the quality of the good will suffer
Expensive to train all workers
