Wealth Creation

Question 1

What are the different factors of production

Answer 1

LAND: includes natural resources, e.g. Produce form farming, or ‘the gifts of nature’, such as fossil fuels and renewable energy.
LABOUR: includes human elements-the workers- and can refer to mental or ,,physical labour.
CAPITAL: includes the equipment, machinery and tools used in the business, and also the money the owner puts into the business.
ENTERPRISE: includes a person (the entrepreneur) with the initial business idea, together with the other three factors of production.

Question 2

Describe wealth creation

Answer 2

• products move through a chain of production which starts in the primary sector and finishes in the tertiary or quaternary sector.
• At each stage in the chain, value is added to the raw materials as a result of the process which is carried out.
• this creates wealth for the business carrying out the process, I.e. Each business involved in the chain is able to make a profit
• this is how business activity creates wealth for an economy.

Question 3

Discuss business activity

Answer 3

Advantages

• jobs are created when business are successful
• lowers unemployment
• less spending on benefits–> more spending on things such as education/roads etc.
• higher incomes which creates more wealth for businesses
• more spending by government

Disadvantage

• non renewable resources are used up eg oil, coal
• pollution, caused by, for eg, production distribution
• jobs lost when, for eg, businesses move production.