Factors of Production Flashcards
Define productivity
Rate at which goods are produced in relation to the work, time and money needed to produce them - output per unit of input
How is productivity calculated?
Total output / number of workers employed
Why is productivity desirable?
Means more goods and services produced with same or fewer resources, lower costs for firm increasing profit
How can land be used to increase productivity?
Land: fertilisers and chemicals are given to plants to improve their health and appearance and raise crop yields, pesticides are used to kill pests. However these can harm people wildlife and the environment this is why there are strict control on their sales
Drainage: Some areas of land are unproductive because they are flooded.Drainage can be used to improve the flow of water off this land and thereby make it more productive and improves quality of water and products
Irrigation: This involves redirecting water from natural sources, such as rivers, lakes or streams, to land that needs more water to become more productive.
- Reclamation: In some circumstances, it is possible to create new land from oceans, riverbeds or lakebeds. Clearly, if more fertile land can be found to grow crops, the productivity of the earth’s land will rise. To reclaim land water is drained from wetlands.
Genetically modified crops: Land productivity has been increased recently by using genetically modified (GM) crops. Producing GM plants involves transferring genes and DNA from one organism to another. This results in plants that are less likely to be affected by disease, may produce higher yields and, in some cases, more appealing to consumers / negative as development of GM crops because genetic engineering is unpredictable - could cause allergic reactions or other negative health effects.
AO4 negative health effects decrease productivity worsen standards of living, costs increase lower profit and may need to pay for sick leave
How can labour (human capital) be improved to increase productivity
Training: One way to improve the quality of human capital is to invest in training which increases the knowledge and skills of workers so they can do their jobs more effectively. Training is important because it allows employees to acquire new skills, improve existing ones, perform better and be better leaders. It also helps to improve employee motivation so productivity will be higher. Teach staff how to work more safely in their new environment. The government can help to improve the quality of human capital by investing in the education system. This might involve providing more equipment for schools and improving the quality of teaching. To equip young people with the skills needed in the workplace, a government might invest more in vocational education. Firms can also improve the productivity of their workers by providing their own training.
Improved motivation: piece rates - amount of money paid for each item a worker produces rather than the time taken to make it acts a financial incentive to be more productive / some workers need non-financial incentives e.g. job rotation where the person who does a particular job regularly changes if people are trained to do different jobs they are more interested/less bored as there is more variety therefore motivated
Improved working practices: methods and systems of work employees expected to adopt to increase productivity
Migration: improve human capital by attracting skilled workers from overseas - if immigrants trained/ skilled economy productive /many not skilled but result in skilled adults as they grow up
AO4 - time lag for education, training, immigrants, cant guarantee trained workers will stay - labour/staff turnover, depends on quality of training/education as always opportunity cost/alternatives
How can capital improve productivity?
Improvements - introduction of new technology/more efficient than old, more capital is employed, possibly at the expense of labour, or because new technology is more efficient than existing technology. Advances in technology have helped improve productivity in all three sectors of the economy.
- Primary sector: In agriculture, for example, the use of machinery such as tractors, combine harvesters, lifting equipment and irrigation systems have helped to increase output, reduce waste and improve working conditions. Chemicals and pesticides have raised crop yields and biological research has developed plants that are less likely to suffer from diseases.
- Secondary sector: New technology has featured significantly in manufacturing. Many factories and production lines employ complex plant and equipment. This has led to huge increases in productivity. One example
includes the use of robots that can handle a lot of the repetitive work in factories reduced need to employ in jobs boring demotivating use of resources for efficient.
Tertiary sector: The provision of services has historically been labour intensive but the use of technology is becoming more widespread. For example, in retailing there has been a huge growth in internet shopping
in the last few years. In some supermarkets there are unstaffed checkout systems. The packaging used today is lighter, stronger and more attractive. In health care, there have been dramatic technological advances in medicine and surgical techniques that have improved productivity.
Developments in new vaccines and drugs have reduced patients’ suffering and cured some serious diseases.
AO4 faulty, people may not trust, expensive to begin with not good for developing countries, time to get set in place, lots of cost in rural areas, not effective in actually doing so machinery not always appropriate people may not like/use, other alternatives, service costs maintenance, time lag to train workers to operate machinery
Definitions for factors of production
factors of production: resources used to produce goods and services, which include land, labour, capital and enterprise production: process that involves converting resources into doos or services human capital: value of the workforce or an individual worker labour: people used on production
working capital or circulating capital:
resources used up in production such as raw materials and components
Goods and services provided to satisfy needs and wants of people
Land
Needed to operate, some non-renewable eventually run out cannot be replaced
Renewable land replaced by nature not run out risk if not protected or over exploited could run out
Labour
Labour is the workforce in the economy. Manual workers, skilled workers and
managers are all members of a nation’s workforce. The quality of individual
workers will vary considerably. Each worker is unique, possessing a different
set of abilities, characteristics, skills, knowledge, intelligence and emotions.
The value of an individual worker to a business is their human capital. It is
possible to increase the value of human capital through training and education.
This will help to make workers more productive.
Capital
Capital is often said to be an artificial resource because it is made by labour.
There are two types of capital.
- Working capital or circulating capital, which refers to stocks of raw
materials and components that will be used up in production. It also
includes stocks of finished goods that are waiting to be sold. Retailers such
as supermarkets and chain stores often hold large quantities of stocks
because they specialise in selling finished goods.
Fixed capital, which refers to the factories, offices, shops, machines, tools,
equipment and furniture used in production. It is fixed because it will not be
converted into a final product. Fixed capital is used in production to convert
working capital into goods and services. A company like Honda would have
very large stocks of fixed capital because their production methods involve
using large amounts of hi-tech machinery.
Enterprise
Entrepreneurs play a special role in the economy. They are responsible for
setting up and running businesses. Without them production would not take
place. But what exactly do entrepreneurs do?
They come up with a business idea: This might involve the production of
a completely new product. However, this is unusual. Most new businesses
supply goods or services that are currently produced by others. That said,
an entrepreneur might feel that there is a gap in the market for a slightly
different product, or that it is possible to supply exactly the same product
more effectively. For example, an entrepreneur might open a new restaurant
in a city centre when there are dozens already trading. However, a different
cuisine might be offered, such as Lebanese or Malaysian.
They are business owners: They usually provide some money to help set
up a business and are responsible for its direction. For example, a business
owner might decide to expand the business in the future or extend the
range of products.
- Entrepreneurs are risk-takers: For example, they are likely to risk their
own money in the venture. If the business collapses, they may lose some
or all of their money. However, if the business is successful they may make
a lot of profit. But when they start up, they do not know what will happen -
they are taking a risk.
- Entrepreneurs are responsible for organising the other three factors
of production: They have to buy and hire other resources such as raw
materials, tools, equipment and labour. Entrepreneurs need to use a range
of skills such as decision making, people management, time management
and financial judgement to organise production factors effectively.
More definitions
fixed capital stock of 'man-made' resources, such as machines and tools, used to help make goods and services entrepreneurs individuals who organise the other factors of production and risk their own money in a business venture
capital intensive production that relies more heavily on machinery relative to labour labour intensive production that relies more heavily on labor relative to machinery - Labour harder to manage and services
Activities in private sector
business activity involves extracting raw materials from the earth. Here are some examples.
- Agriculture involves a range of farming activities. It is probably the most important primary sector activity for most countries. Most agriculture is concerned with food production. However, other examples include decorative
or exotic products, such as cut flowers, nursery plants and tropical fish.
-Fishing involves netting, trapping, angling and trawling fish. It also includes catching or gathering other types of seafood, such as mussels, prawns, lobsters, crabs, scallops and oysters. China is the world’s largest fish producer.
- Forestry involves managing forests to provide timber for wood products. Modern forestry also involves protecting the natural environment, providing access and facilities to the public and managing areas for wildlife
-Mining and quarrying involves the extraction of raw materials such as coal, iron ore, copper, tin, salt and limestone from the ground. This sector also includes the extraction of oil and gas.
Secondary sector
secondary sector: production involving the processing of raw materials into finished and semi-finished goods.
All of manufacturing, processing and construction lie within this sector. Secondary sector business activities include
metalworking, car production, textile production, chemical and engineering industries, aerospace manufacturing, energy utilities, engineering, food processing, construction and shipbuilding.
Some businesses focus on the production of semi-finished goods (sometimes called intermediate goods or producer goods). These goods are sold to other businesses and used as inputs for the production of final goods, which are then
sold to consumers. Examples of semi-finished goods might include the parts used in assembly plants to make motor cars such as steering wheels, car seats, brakes, light fittings, engines, electric cables, switching mechanisms and exhaust
systems.
Assembly plants: factory where parts are put together to make a final product .
Many developed countries secondary sector declined
Tertiary sector
Tertiary: production of services in the economy
commercial services: freight delivery, debt collection, printing and
employment agencies
- financial services: banking, insurance, investment advice and pensions
household services: plumbing, decorating, gardening and house maintenance
- leisure services: television, tourism, hotels and libraries
- professional services: accountancy, legal advice and medical care
_ transport: train, taxi, bus and air services.
Define de-industrialization
Decline in manufacturing
Why has manufacturing declined in developed countries while services have grown?
- People may prefer to spend more of their income on services than
manufactured goods. There has also been a decline in demand for the
goods produced by some of the traditional industries in manufacturing,
such as shipbuilding and textiles. - There is fierce competition in the production of manufactured goods from
developing countries such as Brazil, China and India. - As countries develop, their public sector grows. Since the public sector
mainly provides services, this adds to the growth of the tertiary sector. - Advances in technology mean that employment in manufacturing falls
because machines replace people
