Chapter 3 - The Factors of Production

Question 1

What is the theory of the factors of production?

Answer 1

the basic building blocks that in combination, are required to create a business, and produce goods and services. These are important input to every business. There are four factors of production:

1. Natural resources
2. Labor
3. Capital
4. Entrepreneurship

Question 2

What is labor? What is a labor intensive business? Give examples.

Answer 2

the people who contribute their efforts to a business. A business or a process that requires either a large number of workers, or is particularly dependent upon workers. Examples: McDonald’s, Walmart, DoD, IAF, People’s Liberation Army

Question 3

What is capital? What are capital intensive businesses? Explain.

Answer 3

money or the machines and technologies that money can buy. A business or a process that requires either a large amount of capital or is particularly dependent upon capital. Examples: auto manufacturers, banks, oil companies

Question 4

What are natural resources? What is a resource intensive business? Give examples

Answer 4

things found in nature. Resources that grow out of the earth or can be extracted from it. A business or a process that requires either a large quantity of natural resources or is particularly dependent on natural resources. Example: fruit farming.

Question 5

How to use factors effectively?

Answer 5

Business owners and business managers need to understand these fundamental inputs and need to vary the quantity, quality of mix of these factors according to changing circumstances.

Question 6

What is the Industrial Revolution?

Answer 6

the Industrial Revolution of the 18th and 19th centuries shifted the livelihoods of many people away from agrarian and land-based work to more capital-intensive, factory-based work

Question 7

What are theories? Why do we use them?

Answer 7

Theories help us understand complex phenomena. The theory of factors of production evolves as thinkers and researchers continue to study business.

Question 8

What is the 4th factor of production?

Answer 8

In the late 20th century, entrepreneurship joined the other three as academics and theorists continued to better understand the nature of businesses

Question 9

What is the 5th factor pf production?

Answer 9

In the early 21st century, in response to changing nature of many businesses, many argue that we should adapt our analysis and understanding of businesses to include a fifth factor of production: information