Factors of Production Flashcards
What is a factor of production (FOP)?
A FOP is any resource that can be used in the production of goods and services. To satisfy the demand for goods and services in an economy, we must combine the factors of production. ALL FOPs are scarce resources.
What are the FOPs?
CELL: Capital, Enterprise, Land, Labour.
What is land as a LOP?
Land applies to natural resources as well as empty/undeveloped land/property.
What is labour as a LOP?
Labour is the physical and mental effort. It is the people and it is the workforce. It’s the people producing and designing the goods that people demand.
There can be two forms of labour; firstly, the human equivalent of a natural resource. It is the natural ability an untrained, uneducated person brings to a particular production process. The skills a worker has as a result of education, training, or experience that can be used in production are called human capital.
What is capital as an FOP?
Capital goods are goods that are used to produce other goods eg. a factory. They are not produced for immediate consumption, but rather they are for other goods.
Enterprise
The ability to combine the other three FOPs together. to produce goods and services.
Owning Resources
Owning resources results in reward for the owner. For example, if you own land you receive rent as reward, labour and wage etc.
