Factors of production n Resources used for production n Types: n Land n Capital n Labour n Entreprenuership
Land n Natural resources n Characteristics n A gift of nature n Limited in supply n Land is immovable n The supply of land involves no opportunity cost
Capital n Man-made resources used for further production n Examples: machines, raw materials, tools n Features: n Man made n It raises the productivity of other factors
Land or Capital? n Ice at Mount Everest n Ice in a skiing field n Sea water in a seafood restaurant n Sharks in the Atlantic Ocean n Sharks at the Ocean Park
Human Resources n Labour n Entreprenuership
Labour Supply n Measured in terms of time (man hour) n Labour supply = no. of workers x no. of working hours per worker
Labour Supply n Measured in terms of time (man hour) n Labour supply = no. of workers x no. of working hours per worker n Factors affecting labour supply: n Size of population n Size of working population n No. of working hours
How to increase labour supply? n population growth (by natural growth or immigration) n monetary rewards n import of labour from other countries n retirement age (e. g. from 60 to 70) n school leaving age (e. g. from 16 to 17)
Labour productivity n Measured in terms of output per unit of labour
How to raise labour productivity? n Better education and training n Other factors of production( quantity & quality) n Better management or organization. e. g. division of labour n Better working conditions n Greater fringe benefits (housing allowances, medical care, bonus, meal. . )
Mobility of Labour n Geographical mobility: the ease at which labour can move from one working place to another. n Occupational mobility: the ease at which labour can change from one type of job to another
Factors affecting occupational mobility n Monetary / non-monetary rewards n income of the present job (higher opportunity cost in changing job) mobility n Specialization of skills mobility n Licensing requirements mobility n Higher age of workers mobility
Factors affecting geographical mobility of labour n Transport n Social factors n Economic conditions ( home country/other countries) n Political stability n Immigration or emigration restrictions
Factor returns n Rent n Interest n Wage n Profits