2: Factors of Production

Question 1

Define the factors of production

Answer 1

LAND: any natural resources or what occurs on the land used for production, LABOR: any mental or physical human effort, CAPITAL: any human made product needed to produce a good or service, ENTERPRISE: the willingness and ability to bear risks in order to make a successful business

Question 2

Describe the two types of capital

Answer 2

Capital Goods: Goods produced to make other goods (wanted for what they do), Consumer Goods: Goods made to satisfy the consumer

Question 3

What type of factor of production is a road

Answer 3

Capital

Question 4

What is geographic mobility

Answer 4

Being able to move from one location to another

Question 5

What is occupational mobility

Answer 5

Being able to change its function or do many different jobs, e.g. a truck transporting books instead of food

Question 6

How is land mobile

Answer 6

Land is not geographically mobile to a certain extent because you cannot move it from one place to another (buildings, forest), However wildlife for example can be moved, Most land is occupationally mobile as its function can change, land used for farming can be used to build a factory

Question 7

How is labour mobile

Answer 7

Labour is geographically mobile as workers can move from one location to another, Labour is not very occupationally mobile because different jobs require different skills; a doctor can’t work as a musician. However in some instances it is possible, a doctor can work as a medicine professor in some cases

Question 8

How is enterprise mobile

Answer 8

Enterprise is both occupationally and geographically mobile. This is because the entrepreneur can start a successful business in another country, and start a business in a completely new field if it was successful before

Question 9

How is capital mobile

Answer 9

Most capital is geographically mobile because you can move one good from one place to another, Some capital is also occupationally mobile because equipment can be used for different purposes, e.g. a truck that used to carry books, now carries toys

Question 10

What affects the mobility of labour

Answer 10

Geographically: 1. If moving, may cause compromises to their children’s education, many will not move 2. Moving away from family and friends may discourage moving for many people 3. Expensive housing 4. Lack of information on available jobs, Occupationally: 1. Lack of information on other jobs available 2. Lack of skills to change jobs

Question 11

How does land change its quantity? What are the factors?

Answer 11

If soil erosion occurs, land quantity will decrease. If land is reclaimed, land quantity will increase. However, it does not change much

Question 12

How may the quality of land change

Answer 12

Quality of land may increase or decrease if people take care of land like applying fertilizers to improve fertility

Question 13

What two key factors cause the quantity of labour change?

Answer 13

1. Number of available workers 2. Number of working hours

Question 14

What may cause the quantity of labour to increase or decrease, in terms of number of available workers

Answer 14

1. Population numbers (more people to work) 2. School-leaving age (people start working earlier) 3. Retirement age (people may work for short periods of time) 4. Attitude towards working women (Fewer people available to work) 5. Number of people between school-leaving age and retirement age (age structure)

Question 15

What may cause the quantity of labour to increase or decrease in terms of number of working hours

Answer 15

Number of people working part-time or full time, Length of working day, Duration of overtime, Length of holidays, Number of days lost to sickness

Question 16

What affects the quality of labour

Answer 16

Education, Training ,Experience ,Healthcare

Question 17

What is productivity, and how does it affect worker output

Answer 17

Productivity is the amount of output produce per factor of production per worker hour. The more productive a worker is, the more output they will produce

Question 18

What affects the quantity of a capital good

Answer 18

Investment into buying capital goods (money put into buying capital goods

Question 19

What is a gross investment

Answer 19

Total spending on capital goods (to have more tools)

Question 20

What is depreciation

Answer 20

Value of capital goods that have worn out

Question 21

What is a net investment and how is it different from a negative investment

Answer 21

Gross (number of tools bought in total which could replace and not) - depreciation (number of tools worn out) = Net investment (number of tools actually bought not meant to replace) => Tells us how much the company actually invested, Negative net investment is when more capital goods are worn out than replaced

Question 22

How does the quality of capital change

Answer 22

Advancements in technology improves capital

Question 23

What affects the quantity of enterprise

Answer 23

If more education and government aid (investments/loans) is given, quantity of entrepreneurs will increase

Question 24

What affects the quantity of enterprise

Answer 24

Quality will improve if more entrepreneurs are educated, trained, experienced and healthy

Question 25

Identify the payments to the factors of production

Answer 25

Land → Rent, Labor→ Wages, Capital > Interest, Enterprise > Profit