Factors of Production Flashcards
What are the characteristics of natural resources?
- The supply is fixed
- Gifts from nature
- Must be developed
- Can be depleted or destroyed
Natural resources can be classified as renewable or non-renewable.
What are the importance of natural resources?
- Production of goods and services
- Quality of the environment
- Economic development
- Job creation
- Export opportunities
- Ownership opportunities
Natural resources play a critical role in a country’s economy.
What is rent in the context of natural resources?
Payment made to the owners of natural resources for the use of the resources
It excludes rental payments for improvements to land.
List the factors that influence rent.
- Demand
- Quality of resource
- Supply (availability)
- Location
- Technology & Climate
These factors are critical in determining the rental value of natural resources.
Define labour.
Any human effort (mental/physical) put into the production of goods and services with the aim of receiving a reward
Labour is a key factor in production.
What are the characteristics of labour?
*Physically present during use
*Cannot be stored or hoarded
*Heterogeneous in quality
*Bargaining process between firm and worker
*Low occupational and geographical mobility
Labour quality is influenced by various factors including education and health.
What is the largest contributor to national income?
Labour (50%)
The contribution of labour to national income underscores its importance in the economy.
What determines the quantity of labour in South Africa?
*Population growth
*Labour force participation rate
*Migration
These factors influence the size and growth of the labour force.
What are the three factors that determine the quality of labour?
*Increased school education
*Skills development
*Health
Education and skills development are crucial for improving labour quality.
What is the remuneration of labour?
*Wages & Salaries
*Wage Rate
*Earnings
Wages are the basic amount without benefits, while earnings include fringe benefits.
Define capital.
All manufactured resources such as machinery, tools, buildings, vehicles, computers
Capital is essential for the production of goods and services.
What are the characteristics of capital?
*Capital is owned
*Used in production
*Must be created
*Not fixed supply
*Savings necessary for capital formation
Capital formation can come from various sources, including government and private businesses.
What is the relationship between capital investment and economic growth?
Direct relation between investment in capital formation and economic growth
Economic growth is measured by an increase in real GDP.
What is the remuneration for capital?
Interest received by the owner of capital
The interest rate controlled by the Reserve Bank influences capital remuneration.
Define entrepreneurship.
Someone who organizes and assumes the risk of a business in return for profits
Entrepreneurs play a vital role in the economy.
List the characteristics of an entrepreneur.
*Takes initiative
*Combines factors of production
*Bears risks
*Creates new enterprises
*Opens new markets
Entrepreneurs are essential for innovation and market competition.
What are the importance of entrepreneurship?
*Ensures competition
*Better products at lower prices
*Job creation
*Increases efficiency
*Creates new wealth
*Increases living standards
Entrepreneurship drives economic growth.
What is the profit formula for an entrepreneur?
Difference between revenue received and cost of producing
Profits are crucial for sustaining business operations.
List the factors that influence profit.
*Economic conditions
*Changes in demand
*Price of product
*Competitors
These factors are critical for business profitability.
