Micro 2: Factors of production and the PPF diagram Flashcards
Outline the four factors of production
Land, Labour, Capital and Enterprise
Land definition
naturally occurring resources, such as gold ore and oil
Labour definition
The physical an mental efforts of the people who make the goods and services
Capital definition
These are physical, man-made resources, such as factory buildings and machinery.
Enterprise definition
The person who organises the business and often takes the risk of investing their resources into the act of production.
How do you pay for land
Land is paid for through rent to the owner of the land.
How do you pay for labour
Labour is paid for through wages
How do you pay for capital
Capital is paid for through interest payments.
How do you pay for enterprise
Enterprise is paid for through profit.
What is a Production Possibility Diagram:
Diagram used to illustrate the maximum quantities of two goods that a producer or economy can produce in any combination over a given period of time.
What is Productive Efficiency:
A situation in which a producer or economy is making full use of the resources available.
