factors of production

Question 1

What is the central economic problem?

Answer 1

Scarcity

Scarcity arises because potential demands exceed potential supplies.

Question 2

What are the four factors of production?

Answer 2

• Land
• Labour
• Capital
• Entrepreneur

Each factor plays a unique role in the production of goods and services.

Question 3

What does the factor ‘Land’ refer to?

Answer 3

Natural resource

Includes the surface of the earth, lakes, rivers, forests, and areas for farms or factories.

Question 4

What is the reward for owning land?

Answer 4

Income generated

The income is derived from the natural resources owned.

Question 5

What does the factor ‘Labour’ represent?

Answer 5

Human resource

The basic determinant of labour is the nation’s population.

Question 6

What is the reward for labour?

Answer 6

Wage or salary

This is the compensation paid to workers for their efforts.

Question 7

What is ‘Capital’ in the context of production?

Answer 7

Man-made aid to production

Capital includes all inputs that have been produced to aid in production.

Question 8

What are examples of capital goods?

Answer 8

• Factories
• Machines
• Transportation
• Other equipment

These goods help improve the output from land and labour.

Question 9

What is the reward for capital?

Answer 9

Rate of return earned

This is the profit generated from capital investments.

Question 10

What role does the ‘Entrepreneur’ play in production?

Answer 10

Organises the other three factors and takes the risk of production

Entrepreneurs are crucial for coordinating resources and driving production.

Question 11

What is the return for enterprise?

Answer 11

Profits made

Entrepreneurs earn profits from successful management of production factors.