GCSEBusinessAQARevision NotesBusiness in the Real WorldThe Purpose & Nature of BusinessesFactors of Production

Factors of Production (AQA GCSE Business)

Revision Note

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Lisa Eades

Capital, Enterprise, Land & Labour

  • The factors of production are the resources used by businesses to produce goods and services

The Four Factors of Production

Capital

Enterprise

  • Capital includes any man-made resource used to produce goods/services

  • Examples include tools, buildings, machines and computer equipment

  • Enterprise involves taking risks when setting up or running a business

  • An entrepreneur decides on the combination of the factors of production necessary to produce goods/services with the aim of generating profit

Land

Labour

  • This includes non man-made natural resources and physical locations that are used for production

  • Some regions have vast supplies of a particular natural resource and are able to specialise in its production, e.g. oil, wood, fish, iron ore

  • This includes human input into the production process

  • Labour involves mental or physical effort

    • It can be skilled or unskilled

    • Its effectiveness is determined by education, training & experience workers have

  • The production of any good or service requires the use of a combination of all four factors of production

Diagram: Factors of Production in Vehicle Production

The combination of factors of production in manufacturing a vehicle

  • In order to produce a vehicle, a business requires

    • Capital, including a CAD/CAM system as well as a production line that may use robots

    • Enterprise, including the financial resources to pursue a vehicle idea that may have been determined using market research

    • Land, including factory premises and storage facilities, as well as a test track to check vehicles meet quality standards

    • Labour, including design and production workers, as well as quality testers

Examiner Tip

In the exam, you could be asked to identify one or more factors of production. 'Identify' questions do not require any explanation, so you could simply write, for two marks:

Land, Labour

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    Lisa Eades

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