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Factors of production Resources used for production

Types: Land

Capital

Labour

Entreprenuership

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Land Natural resources

Characteristics A gift of nature

Limited in supply

Land is immovable

The supply of land involves no opportunity

cost

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Capital Man-made resources used for further

production

Examples: machines, raw materials, tools

Features:

Man made

It raises the productivity of other factors

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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

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Human Resources

Labour

Entreprenuership

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Labour Supply Measured in terms of time (man hour)

Labour supply = no. of workers x no. of

working hours per worker

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Labour Supply Measured in terms of time (man hour)

Labour supply = no. of workers x no. of workinghours per worker

Factors affecting labour supply:

Size of population

Size of working population

No. of working hours

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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)

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Labour productivity Measured in terms of output per unit of

labour

Average labour productivity = average output per man hour

June 2005 Firm A Firm B

Number of working hours per worker 240 180

Units of output 7200 6400Average labour productivity 30 35.6

Firm B has a higher labour productivity than firm A

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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..)

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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

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Factors affecting occupational

mobility Monetary / non-monetary rewards

income of the present job (higheropportunity cost in changing job)

mobility

Specialization of skills mobility

Licensing requirements mobility

Higher age of workersmobility

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Factors affecting geographical

mobility of labour

Transport

Social factors

Economic conditions ( home country/other

countries) Political stability

Immigration or emigration restrictions

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Factor returns Rent

Interest

Wage

Profits