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SC3 – Factors of Production

SC3 – Factors of Production. Lim Sei Kee @ cK. OPPORTUNITY COST. A: Cost of losing a job? B: Cost of starting a business? C: Cost of employing staff? D: Cost of something given up?. Opportunity cost.

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SC3 – Factors of Production

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  1. SC3 – Factors of Production Lim SeiKee @ cK

  2. OPPORTUNITY COST A: Cost of losing a job? B: Cost of starting a business? C: Cost of employing staff? D: Cost of something given up?

  3. Opportunity cost • measures the cost of any economic choice in terms of the next best alternative foregone EXAMPLES: The opportunity cost of deciding not to work is the lost wages foregone  The opportunity cost of spending money on a foreign holiday is the lost opportunity to buy a new television.

  4. WHY BUSINESSES FAIL? • Poor Management • Insufficient Capital • Lack of Planning • Operational Inefficiencies

  5. REVISION • ( ): describes the actions of someone who shows some initiative by taking a risk by setting up, investing in and running a business.  • ( ) - something you have to have

  6. Factors of production • To produce goods and services requires resources. We call these the factor inputs available in the production process. • Economists make a distinction between three types of resources - land, labour and capital. • LAND • LABOUR • CAPITAL

  7. Factors of production are the resources of LAND, LABOUR, CAPITAL and ENTERPRISE used to produce goods and services.

  8. LAND • Land is the natural resources on the planet. It includes space on the ground, hills, seas, oceans, air etc

  9. LABOUR • Labouris the human input (workers, managers etc) into the production process. • Each individual has a different level of skills, qualities and qualifications. This is known as the HUMAN CAPITAL.

  10. CAPITAL • Man made physical goods used to produce other goods and services. • Examples include machines, computers, tools, factories, roads etc. • Increases in the level of capital are called INVESTMENT

  11. ENTERPRISE • The entrepreneur provides the initial ideas. • They risk their own resources in business ventures. They also organise the other 3 factors of production.

  12. Example: What resources go into making a car? Labour: Workers employed directly in the car industry; engineers, designers, paint sprayers, testers, management staff, transport & distribution workers etc Land: Natural resources used in manufacturer, land for plant and equipment Capital: Fixed capital: machinery, technology, buildings + Working capital: i.e. stocks of raw materials and components Entrepreneurship(sometimes seen as a separate factor): management, risk-taker

  13. Types of production • The factors of production are combined to make goods and services. Choices have to be made over what to produce and how to produce. • The value of total production in an economy is known as TOTAL OUTPUT.

  14. Types of Industry • (1) PRIMARY INDUSTRY • (2) SECONDARY INDUSTRY • (3) TERTIARY INDUSTRY

  15. (1) PRIMARY INDUSTRY • Industry that extracts raw materials from the earth, such as coal, fish and wheat. Raw materials are mined, collected, grown or cut down. • Examples coal mining, agriculture, oil extraction

  16. (2) SECONDARY INDUSTRY • Industry that processes primary products into manufactured goods. • Examples car production, making tables

  17. (3) TERTIARY INDUSTRY • Businesses that provide a service, either to individuals or to other businesses • Examples hairdressing, banking or solicitors

  18. Assignment (max 4 per group) • A]] Think about IGS. What evidence is there of the 4 factors of production land, labour, capital and enterprise? • B]] Now do the same for a business that you know something about. • C]] What qualities are needed in an effective entrepreneur? • D]] Think about your own human capital. What skills and qualities do you have?

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