3. Factors of Production and Resources Flashcards
What is a Factor of Production?
Scarce resources needed to satisfy demand for goods and services
What are the 4 Factors of Production?
Land - The actual place where business activity takes place. The Earth that contains natural resources
Labour - The physical and mental effort of people to make goods and services
Capital - Man-made resources that help make goods and services.
Enterprise - The ability to employ and organise resources in a firm
What is a Consumer good?
Something that satisfies consumer wants
What is a Capital good?
Man made resources that help to produce the goods and services required to satisfy demand.
What is a Public good?
Essential goods and services provided by the government for the benefit of society. The government has to provide them for free as if a private firm supplied it, no one would buy them
What is a Merit good?
Merit goods are those goods and services that the government feels that people will under-consume, and which ought to be subsidised or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service.
What is a Demerit good?
Goods that are produced but they have a detrimental effect on society. Governments often will tax these goods.
What is Division of Labour?
When the workforce is divided into specific tasks and each worker within the task is a specialist in it.
Why would a firm use Division of Labour?
Higher levels of efficiency and productivity, it minimises waste and makes use everyone’s abilities.
Describe what may happen to a worker who is a specialist.
They may become the go-to person for their skill, they can demand a higher pay because of their specialisation and their expertise. Some worker may also feel that technology makes their expertise obsolete.
What are the disadvantages of the Division of Labour? (3)
Workers may get bored of doing the same job. Quality of work may suffer
Demotivation as the worker may feel useless in the production line
People rely on others too much, meaning the absence of one specialist will result in disruptions along the whole line
Under what circumstances would Division of Labour be used?
Mass production of standardised goods
What is Derived Demand?
Where the demand for a good or factor of production is the result of the demand of another good or factor of production
What is the Law of Diminishing Returns?
When one Factor of Production is increased and all other factors remain the same, output will eventually diminish.
What are some short-term implications of increasing a Factor of Production?
Returns will be greater, increased profits
