Chapter 2 Factors of production The nature of the economic problemThe nature of the economic problemThe nature of the economic problemThe nature of the economic problemThe nature of the economic problemThe nature of the economic problem

Factors of production

1. 15 Learning objectives 1 define and give examples of land, labour, capital and enterprise 2 explain the nature of each factor of production CHAPTER CHECKLIST

2. 15 Learning objectives （ con’t ） 3 analyse the influences on the mobility of factors of production 4 discuss the causes of changes in the quantity and quality of the factors of production 5 identify the payments to the factors of production CHAPTER CHECKLIST

3. Introducing the topic Suppose you're going to open a bakery, what do you have to do?

4. 2.1 The importance of factors of production Factors of production: the economic resources of land, labour, capital and enterprise .

5. 2.1 The importance of factors of production Land: gifts of nature available for production. earth any natural resource

6. 2.1 The importance of factors of production Labour: human effort used in producing goods and services. the mental and the physical effort

7. 2.1 The importance of factors of production Capital/capital goods: human made goods used in production.

8. 2.1 The importance of factors of production Consumer goods: goods and services purchased by households for their own satisfaction.

9. 2.1 The importance of factors of production Enterprise: risk bearing and key decision making in business. Willing and able to take risk Organizing other factors of production risk —— shareholder decision —— CEO

10. 2.2 Mobility of the factors of production The mobility of land Geographically immobile Occupationally mobile

11. 2.2 Mobility of the factors of production The mobility of labour Geographically immobile ： 1.Differences in the price and availability of housing in different areas and countries. 2.Family ties. 3.Differences in educational systems in different areas and countries. 4.Lack of information. 5.Restrictions on the movement of workers.

12. 2.2 Mobility of the factors of production The mobility of labour Occupationally immobile ： difficult to switch from one type of job to another type ×

13. 2.2 Mobility of the factors of production The mobility of capital The geographical and occupational mobility of capital varies according to the type of capital goods. computer table & chair van coal mine lighthouse office block

14. 2.2 Mobility of the factors of production The mobility of enterprise The mobility of enterprise depends on the mobility of entrepreneurs. Enterprise is the most mobile factor of production.

15. 2.2 Mobility of the factors of production The mobility of enterprise Occupationally mobile Geographically mobile

16. 2.3 Quantity and quality of the factors of production The quantity of land The amount of physical land in existence does not change much with time. agricultural land city land rainforests

17. 2.3 Quantity and quality of the factors of production The quantity of land Some natural resources are renewable wind power solar power water

18. 2.3 Quantity and quality of the factors of production The quantity of land Some natural resources are non- renewable gold oil coal

19. 2.3 Quantity and quality of the factors of production The quality of land There are a number of reasons why the quality of natural resources may increase. land rivers fruit trees

20. 2.3 Quantity and quality of the factors of production The quantity of labour The quantity of labour is influenced by two key factors ： the number of workers available the number of hours for which they work

21. 2.3 Quantity and quality of the factors of production The quantity of labour The number of available workers is determined by: a. The size of the population. b. The age structure of the population. c. The retirement age. d. The school leaving age. e. Attitude to working women.

22. 2.3 Quantity and quality of the factors of production The quantity of labour The number of hours which people work is influenced by: a. the length of the average working day b. whether they work full or part-time c. the duration of overtime d. the length of holidays taken by workers e. the amount of time lost through sickness and illness

23. 2.3 Quantity and quality of the factors of production The quality of labour can be improved by better education better training more experience better healthcare

24. 2.3 Quantity and quality of the factors of production The quantity of capital The quantity of capital is influenced by investment and tends to increase with time. Investment: spending on capital goods

25. 2.3 Quantity and quality of the factors of production The quantity of capital net investment = gross investment - depreciation

26. 2.3 Quantity and quality of the factors of production The quality of capital Advances in technology enable capital goods to produce a higher output a better quality output.

27. 2.3 Quantity and quality of the factors of production The quantity of enterprise The quantity of enterprise will increase if there are more entrepreneurs. education tax immigrants

28. 2.3 Quantity and quality of the factors of production The quality of enterprise can be improved by better education better training more experience better healthcare

29. 2.4 Payments for factors of production land —— rent labour —— wages capital —— interest enterprise —— profit

30. Review 1.2 The factors of production Topic 1.2.1 definitions of the factors of production and their rewards 1.2.2 mobility of the factors of production 1.2.3 quantity and quality of the factors of production Guidance Definitions and examples of land, labour, capital and enterprise. Examples of the nature of each factor of production. The influences on the mobility of the various factors. The causes of changes in the quantity and quality of the various factors.

31. Homework ： 1. Copy the key terms: land ， labour ， capital ， enterprise 2. Explain whether land is mobile. 3. Discuss whether or not an ageing labour force will reduce productivity.