Factors of production
The four factors
| Factor | What it is | Reward |
|---|---|---|
| land | natural resources | rent |
| labour | human work | wages |
| capital | man-made tools/machines | interest |
| enterprise | organising the rest + taking risks | profit |
- The entrepreneur provides enterprise — bringing the factors together and risking their own money.
Practice
Match each factor to its reward.
Land→rent, labour→wages, capital→interest, enterprise→profit.
Practice
The entrepreneur provides which factor of production?
The entrepreneur supplies enterprise — combining the other factors and taking the risk.
Mobility, quantity, quality
- mobility = how easily a factor moves to a new use (a multi-skilled worker is mobile).
- quantity can rise/fall (more workers, lost or drained land).
- quality can rise (training, new technology) — so each factor produces more.
Practice
Training and new technology can raise the quality of labour and capital.
Higher-quality factors produce more; training improves labour and new tech improves capital.
You've got it
Key idea
- land/labour/capital/enterprise earn rent/wages/interest/profit
- the entrepreneur combines the factors and takes the risk
- factors vary in mobility, quantity, quality (training raises quality)