IGCSE Economics Topic Questions on FACTORS OF PRODUCTION Paper 1

  • There are 4 factors of production; namely land, labour, capital and enterprise
  • Land: The word land refers to all the natural resources.
  • Oil, coal, natural gas, metals, stone and sand are natural resources. Other natural resources are air, sunlight, soil and water. Animals, birds, fish and plants are natural resources as well.
  • Resources may be either renewable or non-renewable.
  • Renewable resources are the resources which can be revived, through the natural process, over time.
  • On the other hand, non-renewable resources are the natural resources which are not going to be replenished, shortly.
  • Renewable resources do not become extinct easily, and so they are sustainable in nature.
  • Land is geographically immobile in that a given piece of land cannot be removed from one place to another.
  • However, land can be occupationally mobile in that it can be put to different uses, e.g. farming, grazing and building.
  • Labour: Labour is the effort that people contribute to the production of goods and services. Labour resources include the work done by the waiter who brings your food at a local restaurant as well as the engineer who designed the bus that transports you to school. It includes an artist's creation of a painting as well as the work of the pilot flying the airplane overhead.
  • The number of hours and the number of people that work determine the quantity of labour.
  • Some of the factors influencing the size of the labour force are: Size of the population, the age structure of the population, retirement age, the attitude of women towards work, the school leaving age amongst others.
  • Capital goods are used to make other goods and services. Capital goods include items like buildings, machinery and tools.
  • Net investment increases a company's stock of capital goods. Net investment is the total amount of money that a company spends on capital assets, minus the cost of the depreciation of those assets. This figure provides a sense of the real expenditure on durable goods such as plants, equipment, and software that are being used in the company's operations.
  • Enterprise involves taking risks and making decisions. Some of the factors that encourage enterprise are: Lower taxes, less regulation and improved education
  • Successful entrepreneurs appear to be geographically and occupationally mobile.

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