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Factors of production

Factors of production. Resources used for production Types: Land Capital Labour Entreprenuership. Land. Natural resources Characteristics A gift of nature Limited in supply Land is immovable The supply of land involves no opportunity cost. Capital.

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Factors of production

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  1. Factors of production • Resources used for production • Types: • Land • Capital • Labour • Entreprenuership

  2. Land • Natural resources • Characteristics • A gift of nature • Limited in supply • Land is immovable • The supply of land involves no opportunity cost

  3. Capital • Man-made resources used for further production • Examples: machines, raw materials, tools • Features: • Man made • It raises the productivity of other factors

  4. Land or Capital? • Ice at Mount Everest • Ice in a skiing field • Sea water • Sea water in a seafood restaurant • Sharks in the Atlantic Ocean • Sharks at the Ocean Park

  5. Human Resources • Labour • Entreprenuership

  6. Labour Supply • Measured in terms of time (man hour) • Labour supply = no. of workers x no. of working hours per worker

  7. Labour Supply • Measured in terms of time (man hour) • Labour supply = no. of workers x no. of working hours per worker • Factors affecting labour supply: • Size of population • Size of working population • No. of working hours

  8. How to increase labour supply? •  population growth (by natural growth or immigration) •  monetary rewards •  import of labour from other countries •  retirement age (e.g. from 60 to 70) •  school leaving age (e.g. from 16 to 17)

  9. Labour productivity • Measured in terms of output per unit of labour

  10. How to raise labour productivity? • Better education and training • Other factors of production( quantity & quality) • Better management or organization. e.g. division of labour • Better working conditions • Greater fringe benefits (housing allowances,medical care,bonus, meal..)

  11. Mobility of Labour • Geographical mobility: the ease at which labour can move from one working place to another. • Occupational mobility: the ease at which labour can change from one type of job to another

  12. Factors affecting occupational mobility • Monetary / non-monetary rewards •  income of the present job (higher opportunity cost in changing job) mobility  • Specialization of skills   mobility  • Licensing requirements   mobility  • Higher age of workers  mobility 

  13. Factors affecting geographical mobility of labour • Transport • Social factors • Economic conditions ( home country/other countries) • Political stability • Immigration or emigration restrictions

  14. Factor returns • Rent • Interest • Wage • Profits

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