Factors of production
The four factors
| Factor | What it is | Reward |
|---|---|---|
| land | natural resources (fields, oil, water) | rent |
| labour | human work | wages |
| capital | man-made aids to production (machines) | interest |
| enterprise | combining the others and taking the risk | profit |
- Land includes non-renewable resources (oil, coal) that can run out.
Practice
Match each factor to its reward.
Land→rent, labour→wages, capital→interest, enterprise→profit.
Specialisation & division of labour
- Specialisation — making only what you are best at, then trading.
- Division of labour — splitting a big job into small repeated tasks.
- + faster, less wasted time, higher output → lower cost; − boring, one absence stops the line, narrow skills.
Practice
A disadvantage of the division of labour is that:
Division of labour raises output but is monotonous, and one absence can stop the line.
Mobility of factors
- occupational mobility — moving to a new job/use (a teacher retraining as a nurse).
- geographical mobility — moving to a new place (land can't move at all).
Practice
A worker who retrains for a completely different job shows:
Moving between jobs/uses is occupational mobility; moving between places is geographical.
You've got it
Key idea
- land/labour/capital/enterprise earn rent/wages/interest/profit
- specialisation + division of labour raise output but bore workers and risk stoppages
- mobility: occupational (new job) vs geographical (new place)