Econ test chapter 1.2 (Factors of production) Flashcards
what are factors of production
the resources required to produce goods or services
Capital Enterprise Labour Land
consumer goods
goods and services that are purchased by households for their own satisfaction
labour productivity
output per worker hour
output
goods and services produced by the factors of production
labour force
people in work and those actively seeking work
capital
the tools and equipment required in the production process such as: tools (robots), machinery (packaging machines), vehicles.
Enterprise
The skills a business person requires to combine and manage the other factors of production
Land
the natural resources required in the production process e.g wood, metal ores, agricultural produce
Labour
the human resources required in the production process, including skilled and unskilled labour
What are the rewards for land
Rent- income that comes from ownership of property (assets)
Paid by the tenants of the land resources
Reward for labour
Wages and salaries- wages are paid on an hourly basis while salaries are paid a fixed amount per month
Reward for capital
Interest- If interest rate is high, it becomes less worthwhile for businesses and households to borrow money for production purposes because the cost of borrowing is high and vice versa
Reward for enterprise
Profit-The return for the enterpreneur’s good businesses ideas and running it.
What can all rewards for CELL be summed up as
Income
Mobility of land
might be used for various purposes e.g a vacant field can be used for growing crops or building a factory
mobility of factors of production
the extent to which resources can be changed for one another in production process
mobility of capital
equipment can be used for different purposes- e.g a factory can be used to manufacture cars or planes
mobility of entrepreneurs
can also be mobile- e.g Elon musk went from founding paypal to Tesla
What do both geographical mobility and occupational mobility both come under
labour mobility
geographical mobility
the willingness and ability of a person to relocate from one area to another for employment
Why are some not geographically mobile
-family ties and related commitments: some people may not want to relocate as they want to be near their family or friends.
-costs of living: between regions and countries, costs of living may be too high, meaning its uneconomical for a person to relocate
occupational mobility
the ease with which a person is able to change between jobs
What does the degree of occupational mobility depend on?
the cost and length of training required to change professions
What helps labour occupational mobility
developing and training employees to improve their skillset as workers can perform a greater range of jobs
The more __________ and __________ mobile workers are in a country, its international __________ and _________ growth tends to be greater
occupationally, geographically, competitiveness, economic
quantity of land
The amount of physical land in existence
What is an example of quantity of land changing
rainforests declining at a faster pace
supply of land reducing because of soil erosion or increasing through land reclamation
non renewable resources vs renewable
resources that cannot be replenished and resources that can be used contantly
How can renewable be turned into non renewable
if resources are exploited; used faster than they are replenished (over-fishing, over-hunting)
Quality of land (examples of it changing)
-fertiilisers may be used to increase fertility of land
-health of fish can be improved if firms stop polluting
Quantity of labour
number of workers available and the number of hours they work
What can influence quantity of labour (explain)
-The size of population
-age structure of population
-The school leaving age
-attitude towards working women
-working hours
-age range of labour force
How can more be produced with the same number of workers
if the workers become more skilled, leasing to an increase in labour productivity
What does increase in labour productivity increase
a country’s output
What does increase in quality of labour look like
carrying out more difficult tasks, working with more complex machinery and producing more and better products
what influences quantity of capital
influenced by investment (spending on capital goods) which tends to increase over time
Gross investment
The total value of the output of capital good produced
depreciation/capital consumption
value of replacement capital (new capital that replaces old, worn out capital)
net investment
the value of the extra capital goods made (the gross investment-depreciation)
practical example of net investment
if a country produces 200 MIL capital goods in one year and there is a depreciation of 70 MIL the net investment is 130 MIL. the country will have more capital goods.
what happens if gross investment is less than depreciation
it means that some of the capital goods taken out of use are not replaced- called negative net investment
quality of capital
advances in technology enable capital goods to produce a higher output and a better quality of output.
e.g development of robotics in car production has increased the number of cars significantly
how can quantity of entrepreneurs increase
a good education system, including university degree courses in economic and business studies.
lowering taxes on firms and less gov. reg. as it can encourage more people to set up businesses.
quality of entrepreneurship
-receive better education, better education better training and more experience
What causes change in quantity and quality of factors of production
demand or supply of CELL
What can influence changes in the costs of production
-change in the national minimum wage: cost of labour increases
-subsidies and taxes
-government regulations
how can taxes change the factors of production
taxes on a firm will increase the overall cost of production
lowering income taxes will create incentive to work, increasing quantity of labour
what does government regulations do to the cost of production
increases it thus decreasing output
what do subsidies do
help reduce production costs, thereby increasing output of goods and services for a firm.
what will net migration of labour do
affect quantity of labour in the economy. The more the immigration, the quantity increases.
what will increase quality of labour
improvement in education and healthcare.
What will unfavourable weather conditions do?
reduce the supply of agricultural goods.
