Factors of production

1
Factors of production

• Resources used for production
• Types
• Land
• Capital
• Labour
• Entreprenuership

2
Land

• Natural resources
• Characteristics
• A gift of nature
• Limited in supply
• Land is immovable
• The supply of land involves no opportunity cost

3
Capital

• Man-made resources used for further production
• Examples machines, raw materials, tools
• Features
• Man made
• It raises the productivity of other factors

4
Land or Capital?

• Ice at Mount Everest
• Ice in a skiing field
• Sea water
• Sea water in a seafood restaurant
• Sharks in the Atlantic Ocean
• Sharks at the Ocean Park

5
Human Resources

• Labour
• Entreprenuership

6
Labour Supply

• Measured in terms of time (man hour)
• Labour supply no. of workers x no. of working
  hours per worker

7
Labour Supply

• Measured in terms of time (man hour)
• Labour supply no. of workers x no. of working
  hours per worker
• Factors affecting labour supply
• Size of population
• Size of working population
• No. of working hours

8
How to increase labour supply?

• ? population growth (by natural growth or
  immigration)
• ? monetary rewards
• ? import of labour from other countries
• ? retirement age (e.g. from 60 to 70)
• ? school leaving age (e.g. from 16 to 17)

9
Labour productivity

• Measured in terms of output per unit of labour

10
How to raise labour productivity?

• Better education and training
• Other factors of production( ?quantity quality)
• Better management or organization. e.g. division
  of labour
• Better working conditions
• Greater fringe benefits (housing
  allowances,medical care,bonus, meal..)

11
Mobility of Labour

• Geographical mobility the ease at which labour
  can move from one working place to another.
• Occupational mobility the ease at which labour
  can change from one type of job to another

12
Factors affecting occupational mobility

• Monetary / non-monetary rewards
• ? income of the present job (higher opportunity
  cost in changing job)? mobility ?
• Specialization of skills ? ? mobility ?
• Licensing requirements ? ? mobility ?
• Higher age of workers ? mobility ?

13
Factors affecting geographical mobility of labour

• Transport
• Social factors
• Economic conditions ( home country/other
  countries)
• Political stability
• Immigration or emigration restrictions

14
Factor returns

• Rent
• Interest
• Wage
• Profits