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Define the term factors of production.
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Define the term factors of production.
Factors of production are the resources (land, labour, capital and enterprise) used to produce goods and services.
What does the term goods mean?
Goods are physical objects that can be touched (tangible), e.g. a mobile phone.
State the meaning of the term services.
Services are actions or activities that one person performs for another (intangible), e.g. a manicure or car wash.
Define the term land.
Land refers to the non man-made natural resources available for production, e.g. oil, wood, fish, corn, iron ore.
What does the term labour mean?
Labour is the human input (mental or physical effort) into the production process.
Define the term capital.
Capital is any man-made resource used to produce goods and services, e.g. tools, buildings, machines, and computers.
What does the term enterprise mean?
Enterprise involves taking risks in setting up or running a firm, and deciding on the best combination of the factors of production to use in achieving the desired goals.
True or False?
Rent is the factor income for capital.
False.
Rent is the factor income for land.
Define the term factor income.
Factor income is the reward households receive when they sell their factors of production to firms (land = rent; labour=wages; capital=interest)
What is meant by the term factor market?
A factor market is the place where firms purchase land, labour, and capital from households e.g a recruitment website is a factor market for labour.
What is meant by mobility of the factors of production.
The mobility of the factors of production refers to how easily firms can switch between different factors of production during production e.g from capital to labour
What does geographical immobility of labour mean?
Geographical immobility of labour occurs when workers find it difficult to move from one geographical area to another in order to secure employment.
What is meant by occupational immobility of labour.
Occupational immobility of labour refers to the inability of a worker to change occupations when they lose a job.
True or False?
A positive net migration rate will increase the quantity of labour available in an economy.
True.
A positive net migration rate (inward - outward migration) will increase the quantity of labour available in an economy.
True or False?
An increase in the quantity or quality of a country's factors of production leads to an outward shift in the potential output of the economy.
True.
An increase in the quantity or quality of a country's factors of production leads to an outward shift in the potential output of the economy.
Define the term technological advances.
Technological advances are innovations that improve the quality of the factors of production, e.g. the development of metal alloys.
Define the term process innovation.
Process innovation is an improvement in processes that lead to productivity improvements, e.g. moving from labour-intensive car production to automated car production.
What is competition policy?
Competition policy is government regulation that aims to prevent monopoly power, resulting in more firms supplying goods and services in an economy.
True or False?
A decrease in the quantity or quality of a country's factors of production leads to an inward shift of the potential output of the economy.
True.
A decrease in the quantity or quality of a country's factors of production leads to an inward shift of the potential output of the economy.
True or False?
Deregulation of fracking in the USA decreased the useable oil reserves.
False.
Deregulation of fracking (extracting oil from shale deposits) in the USA increased the useable oil reserves.