Factors of production are the resources required for the production of goods and services.
Success criteria to remember all the FOPs:
- What types of resource? (natural, human or manmade resources)
- What it consists/includes/definition
- Rewards (Rent, wages, Interest or profit)
- Example: Give representations and real life examples of each FOP
There are namely 4 factors of production:
- Land: It is a natural resource. It is a free gift of nature. It includes everything which is available on, above and under the surface of the earth. Reward for land is rent.
- Example: farms, rivers, sunlight, etc.
- Labour: It is a human resource. It comprises the physical and mental efforts put for the production of goods and services with the intention of earning a reward. Reward for labour is wages or salary.
- Example: nurses, teachers, doctors, etc.
- Capital: It is a man-made resource. It include anything which is required for further production of goods and services. Reward for capital is interest.
- Example: machinery, raw materials, tools, etc.
- Enterprise: It is a human resource. It includes the risk taking ability and decision making skills. This combines all the other 3 factors of production. Reward for enterprise is profits.
- Example: owner, sole proprietor, entrepreneur, etc.
Examples
-
Airline Industry
- Land: Air, Aluminium, Crude Oil
- Labour: Pilot, Flight Attendants
- Capital: Runway, Airplane
- Enterprise: Owner of Airline Company, CEO
-
School
- Land: Place where school is built
- Labour: Teachers, Nurses
- Capital: School Building, Sports Ground
- Enterprise: Trustees, Principal, Directors
-
Google
- Land: Aluminium, Silicon, Place where factories are built
- Labour: Engineers, Designers
- Capital: Robots, Machines, Factories
- Enterprise:Larry Page, Sundar Pichai
Exemplar Questions
- Explain, giving examples, two factors of production used in the tourism industry. (4 marks)
- Labour which is human effort (1) e.g. tourist guides (1).
- Land which is natural resources (1) e.g. beaches (1).
- Capital which is human-made goods and services used in production (1) e.g. hotels (1).
- Enterprise which is risk bearing and decision making (1) e.g. may be undertaken by the owner of a hotel (1).
- What is the difference between labour and enterprise? (4 marks)
- Land is a natural resource (1) whilst labour is human resources/workers (1).
- The payment for land is rent (1) whilst the payment for labour is wages (1).
- Land is geographically immobile (1) whilst there is some limited geographical mobility in the case of labour (1).
- What is the difference between labour and enterprise? (4 marks)
- Up to 2 marks for the diagram:
- Labour is human/effort/workers’ services (1) whilst enterprise is the ability and willingness to bear uncertain risks/organise other factors of production (1).
- Up to 2 marks for the diagram:
- The reward for labour is wages [1], whereas the reward for enterprise is profit [1].
- Enterprise tends to be more geographically or occupationally mobile than labour [2].
- Using appropriate examples, describe the four factors of production. (6 marks)
- Land: natural resources/gifts of nature available for production, e.g. farmland.
- Labour: all physical and mental effort of workers, e.g. teacher.
- Capital: all man-made goods used in production, e.g. machinery.
- Enterprise: the risk bearing and decision making function, e.g. entrepreneur or example of a function
- Note: maximum of 6 marks.