FACTORS OF PRODUCTION

Watch the following videos before continuing. Ensure that you have a good
understanding of the factors of production.
http://www.youtube.com/watch?v=hG9PQHD5ROA
http://www.youtube.com/watch?v=DnsyJjxIeQk
http://www.youtube.com/watch?v=VSGDp0IsdTU

The scarce resources that have been referred to are known as the factors of
production. In order to produce goods or services we require these four factors
of production. It is impossible to produce anything if these factors of production
are not available. These factors are the inputs we require in order to produce
outputs, which are our goods and services.

Consider the image below

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The four factors of production are identified above as land, labour, capital and
entrepreneurship. We will examine the first three factors in detail here.
Entrepreneurship will be examined in detail in module two.

LAND/NATURAL RESOURCES
Land includes all the natural resources on the planet.
A natural resource is anything people can use which comes from nature. People
do not make natural resources, but gather them from the earth. Examples of
natural resources are air, water, copper, wood, oil, wind energy, hydro-electric
energy, iron, and coal. Refined oil is not a natural resource because people make
it.

Most natural resources are non-renewable. A non-renewable resource (also

known as a finite resource) is a resource that does not renew itself at a sufficient
rate for sustainable economic extraction in meaningful human timeframes.

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Let us consider an example:
It takes millions of years for diamond deposits to build up. If we remove all the
diamonds there will be none for our future generations. They will have to wait
thousands of years for more diamond deposits to build up.
Fortunately diamonds are not required for human survival and so are considered
a want.

But what about water? We cannot survive without clean water. Water is being
wasted all over the world and it has become a huge concern for our future
generations. Can you even imagine what the world would be like without
water?

LABOUR/HUMAN RESOURCES
Labour is the human input (workers, managers etc) into the production process.
Human beings are required for the production of all goods and services. Even
goods that are produced by a machine require human input, someone has to turn
the machine on and tell it what to do.

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Each individual has a different level of skills, qualities and qualifications.
Labour is divided between skilled and unskilled labour.
Unskilled labour are workers who require no training, nor skill. Skilled labour
do require training and skill.

Examples of unskilled labour would include domestic workers, mine workers,

street cleaners and farm workers. Can you think of any more?
Skilled labour include teachers, doctors, bankers and lawyers. All skilled
workers require some form of training to be regarded as skilled.

CAPITAL
Man-made physical goods used to produce other goods and services.
Examples include machines, computers, tools, factories, roads etc.

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Capital goods are not purchased with the intention of reselling them. They are
purchased to be used to produce other goods of deliver services which can be
sold for profit.

Consider a business that transports bricks. The service

that this business provides is transportation. The
trucks used to transport the bricks are the capital
goods of the business. These capital goods enable the
business to provide its transportation service to
customers. The business does not have the intention of
selling these trucks because without them they would
not be able to provide their service.
ENTERPRISE/ ENTREPRENEUR
The entrepreneur is the person who provides the initial ideas to start the
business and he is the person who bears the risk of the business.
The entrepreneur is responsible for organizing the other three factors of
production.
The entrepreneur will be examined in detail in module two.
COMPLETE ASSIGNMENT 1

ECONOMIC SYSTEMS
Watch the following video before continuing, it will give you an understanding
of the different economic systems.
http://www.youtube.com/watch?v=8HsLzYo5VqE

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