4.1.1.3 Economic resources Flashcards
What are the four factors of production in economics?
The four factors of production are:
- Land
- Labour
- Capital
- Enterprise
What is ‘land’ as a factor of production?
Land refers to natural resources (e.g., oil, coal, water) and physical space used in production. Its reward is rent.
What is ‘labour’ as a factor of production?
Labour refers to the human workforce and their skills (human capital). Its reward is wages.
What is ‘capital’ as a factor of production?
Capital includes physical goods used in production (e.g., machines, buildings) and working capital (e.g., finished or semi-finished goods). Its reward is interest.
What is ‘enterprise’ as a factor of production?
Enterprise refers to managerial ability, risk-taking, and innovation by entrepreneurs who organize the other factors of production. Its reward is profit.
What is the reward for land as a factor of production?
The reward for land is rent.
What is the reward for labour as a factor of production?
The reward for labour is wages.
What is the reward for capital as a factor of production?
The reward for capital is interest.
What is the reward for enterprise as a factor of production?
The reward for enterprise is profit.
Why is the environment considered a scarce resource?
The environment is a scarce resource because there is a limited amount of natural resources (both renewable and non-renewable) on the planet.
What are renewable resources?
Renewable resources can be replenished over time (e.g., oxygen, fish, solar power) if the rate of consumption is less than the rate of replenishment.
What are non-renewable resources?
Non-renewable resources cannot be replenished once consumed (e.g., coal, oil, natural gas). Their stock decreases over time.
How can renewable resources be managed sustainably?
Renewable resources can be managed by limiting deforestation, imposing fishing quotas, and ensuring consumption does not exceed replenishment rates.
What is the current issue with renewable resource consumption?
Renewable resources are being consumed faster than they can be replenished. For example, the Worldwide Fund for Nature predicts that two planets will be needed to meet global demand by 2050 if this continues.
How can the decline of non-renewable resources be reduced?
The decline of non-renewable resources can be reduced through recycling and finding substitutes (e.g., wind farms instead of fossil fuels).
What is the difference between renewable and non-renewable resources?
Renewable resources: Can be replenished if consumption is managed sustainably.
Non-renewable resources: Cannot be replenished once consumed, leading to a decline in stock over time.
What is the role of entrepreneurs in production?
Entrepreneurs take risks, innovate, and organize the other factors of production (land, labour, capital) to produce goods and services. Their reward is profit.
Why is capital important in production?
Capital (e.g., machinery, buildings) is essential for producing goods and services efficiently. It helps firms minimize costs and maximize productivity.
