Definitions

Factors of production – The economic resources of land, labour, capital, and enterprise

Land – All the natural resources used in the production of goods and services

Labour – All the mental and physical contributions of the employees used in the production of goods and services

Capital – All the human-made resources used in the production of goods and

services

Enterprise – Risk bearing and key decision-making in business

Occupational mobility – Capable of changing use

Geographical mobility – Capable of changing location

Geographical immobility – Incapable of moving from one location to another

Mobility of labour – The mobility of labour to change where it works or in which occupation

Mobility of capital – The ability to change where the capital is used and in which occupation

Mobility of enterprise – The ability to change where the enterprise is used or in which occupation

Entrepreneur – The person who takes risks and makes key decisions in a business

Labour force – People in work and those actively seeking work

Productivity – The output per factor of production in an hour

Labour productivity – Output per worker in an hour

Output – Goods and services produced by the factors of production

Investment – Spending on capital goods

Gross investment – Total spending on capital goods

Depreciation – The value of capital goods that have worn out and become obsolete

Net investment – Gross investment minus depreciation

Negative net investment – A reduction in the number of capital goods caused by some obsolete and worn-out capital goods not being replaced

Summary

• The four factors of production are land, labour, capital, and enterprise.

• Land is a term covering all natural resources.

• Some natural resources are renewable, whereas others are non-renewable.

• Whilst most land is occupationally mobile, land in its traditional meaning is geographically immobile.

• Labour involves the mental and physical effort workers put into producing goods and services.

• The quantity of labour is influenced by the number of workers and the number of hours for which they work.

• The size of the labour force is influenced by the size and age structure of the population, the school leaving age, the retirement age, and attitudes to women working.

• The quality and occupational mobility of labour can be increased by better education and training.

• The geographical immobility of labour may be caused by a lack of housing and information about job vacancies, family ties, and the need to gain a visa to work in a different area.

• Capital goods are used to make other goods and services.

• Net investment increases a country’s stock of capital goods.

• Enterprise involves taking risks and making production decisions.

• Improved education, lower taxes, and less regulation can encourage enterprise.

• Successful entrepreneurs tend to be occupationally and geographically mobile.

Written by Trishiv Ohlan

Content supplied by Mara