- Factors of production are the resources used to produce goods & services
Diagram: The Four Factors of Production
The four factors of product are land, capital, labour and enterprise
- The production of any good/service requires the use of a combination of all four factors of production
- Goods are physical objects that can be touched (tangible) e.g. mobile phone
- Services are actions or activities that one person performs for another (intangible) e.g manicure, car wash
An Explanation of the Four Factors of Production
Land
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Capital |
- Non man-made natural resources available for production
- Some countries have a vast amount of a particular natural resource & so are able to specialise in its production
- E.g. Kuwait specialises in the product of oil which accounts for 95% of its exports
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- Capital is any man-made resource that is used to produce goods/services
- Examples include tools, buildings, machines & computers
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Labour
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Enterprise
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- The human input into the production process, labour involves mental or physical effort
- Not all labour is of the same quality
- It can be skilled or unskilled
- Some workers are more productive than others because of their education, training and experience
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- Enterprise involves taking risks in setting up or running a firm
- An entrepreneur decides on the combination of the factors of production necessary to produce goods/services with the aim of generating profit
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