-The job of producers is to produce goods and services. However they require certain resources to produce these goods and resources
- These resources are called factors of production
- Factors of production are the resources used in the production process for producing various goods and services
- There are 4 factors of production, they are land,labour,capital and enterprise
1) Land- this is a naturally available factor of production and includes the earth available for production. For example farmers require land to grow crops and the land require to build offices
2) Labour- includes the human effort for the production of goods and services. Examples include the workers in any restaurant/ business
3) Capital- this includes the man goods available for the production of other goods and services. Examples include the fryers used in restaurants for making french fries and tractors used by farmers
4) Enterprise- this includes the risk bearing and decision making ability in a business. Examples include entrepreneurs who have taken the risk of starting their own business
- The factors of production must be geographically as well as occupationally mobile in order to function well
- Geographical mobility is the FOP’S ability to move from one place to another
- Occupational mobility is the FOP’S ability to change its use
- Land is occupationally mobile as it can be used for various different purposes, for example land used in farming can be used to build buildings and offices. However, land is geographically immobile as it can’t physically move from one place to another.
-The mobility of labour varies. If the labour force is skilled then it’s easier to work in different places and undertake different tasks with different skill set so are geographically and occupationally mobile
-Factors affecting the geographical immobility of labour include difference in housing price/cost of living, leaving one’s family, difference in education system and lack of availability of work visas
- The geographical and occupational mobility of capital varies according to the type of capital good. Certain types of goods can be transferred/moved from one country to another for examples laptops, printers and cooking utensils used in restaurants.
-Capital goods such as cars, printers and laptops cab also be used for more than one purpose so they’re occupationally mobile as well
-The mobility of enterprise depends on the mobility of the entrepreneur to whom the business belongs. The risk bearing and FOP organising skills of an entrepreneur in a particular industry and country can be applied in a different industry and country as well
-As with the mobility, the quantity and quality of FOP is very important as well
-The quantity of land isn’t affected much, however land reclamation can be used to increase the amount of land available for production. The quality of land can be improved by using fertilizers.
- The quantity of labour is determined by a few factors which are population, age structure, retirement age, school leaving age and ability of women to join the labour force. The quality of labour can be improved through better education, training and healthcare.
- The quantity of capital is influenced by investment. More the amount of money available to invest in the production of capital goods, greater the quantity of capital goods produced. The quality of capital goods depends on the technology and the advancements in technology
- The quantity of enterprise will increase if the number of entrepreneurs increase which will happen through better education and more incentives for people to start their own businesses such as low interest rates and lower tax on firm's profits . The quality of entrepreneurs will increase with an improvement in education, training and healthcare.
- Each of the FOP’S receive the following payments :
Land- rent
Labour- wages
Capital- interest
Enterprise- profit
- These resources are called factors of production
- Factors of production are the resources used in the production process for producing various goods and services
- There are 4 factors of production, they are land,labour,capital and enterprise
1) Land- this is a naturally available factor of production and includes the earth available for production. For example farmers require land to grow crops and the land require to build offices
2) Labour- includes the human effort for the production of goods and services. Examples include the workers in any restaurant/ business
3) Capital- this includes the man goods available for the production of other goods and services. Examples include the fryers used in restaurants for making french fries and tractors used by farmers
4) Enterprise- this includes the risk bearing and decision making ability in a business. Examples include entrepreneurs who have taken the risk of starting their own business
- The factors of production must be geographically as well as occupationally mobile in order to function well
- Geographical mobility is the FOP’S ability to move from one place to another
- Occupational mobility is the FOP’S ability to change its use
- Land is occupationally mobile as it can be used for various different purposes, for example land used in farming can be used to build buildings and offices. However, land is geographically immobile as it can’t physically move from one place to another.
-The mobility of labour varies. If the labour force is skilled then it’s easier to work in different places and undertake different tasks with different skill set so are geographically and occupationally mobile
-Factors affecting the geographical immobility of labour include difference in housing price/cost of living, leaving one’s family, difference in education system and lack of availability of work visas
- The geographical and occupational mobility of capital varies according to the type of capital good. Certain types of goods can be transferred/moved from one country to another for examples laptops, printers and cooking utensils used in restaurants.
-Capital goods such as cars, printers and laptops cab also be used for more than one purpose so they’re occupationally mobile as well
-The mobility of enterprise depends on the mobility of the entrepreneur to whom the business belongs. The risk bearing and FOP organising skills of an entrepreneur in a particular industry and country can be applied in a different industry and country as well
-As with the mobility, the quantity and quality of FOP is very important as well
-The quantity of land isn’t affected much, however land reclamation can be used to increase the amount of land available for production. The quality of land can be improved by using fertilizers.
- The quantity of labour is determined by a few factors which are population, age structure, retirement age, school leaving age and ability of women to join the labour force. The quality of labour can be improved through better education, training and healthcare.
- The quantity of capital is influenced by investment. More the amount of money available to invest in the production of capital goods, greater the quantity of capital goods produced. The quality of capital goods depends on the technology and the advancements in technology
- The quantity of enterprise will increase if the number of entrepreneurs increase which will happen through better education and more incentives for people to start their own businesses such as low interest rates and lower tax on firm's profits . The quality of entrepreneurs will increase with an improvement in education, training and healthcare.
- Each of the FOP’S receive the following payments :
Land- rent
Labour- wages
Capital- interest
Enterprise- profit