Slides in this set
Factors of Production
O Land- includes all of the natural physical resources for example
The raw materials used including oil etc
O Labour- is the human input into the production process.
O Capital- Capital goods can be used to produce other consumer
goods and services in the future. Capital includes machinery,
equipment, new technology, factories and other buildings.
O Entrepreneurship- an individual who seeks to supply products to
a market for a rate of return (i.e. to make a profit). Entrepreneurs
will usually invest their own financial capital in a business and take
on the risks. Their main reward is the profit made from running the
O Factor Endowment- A country's stock of factors of production
(Quality & Quantity)…read more
O Specialisation is when we concentrate on a particular product or
O Division of labour is a particular type of specialisation
where the production of a good is broken up into many
separate tasks each performed by one person or by a small
group of people. It raises output per person, thereby
reducing costs per unit because lower skilled workers are
easily trained and quickly become proficient through
constant repetition of a task.…read more
O Free Market Economy- Resources are
allocate through the market mechanism of
demand and supply. Decisions are made by
millions of people and thousands of firms on
the allocation of resources
O Command Economy- The government has a
central roll in the allocation of resources.
O Mixed Economy- Both the public and private
sectors play a role in the allocation of scarce
resources. Decisions involve an interaction
between firms, labour and the government,
mainly through the market mechanism.…read more
O Opportunity cost measures the cost of any choice in terms of the next best
O Work-leisure choices: The opportunity cost of deciding not to work an extra ten hours
a week is the lost wages foregone. If you are being paid £6 per hour to work at the
local supermarket, if you choose to take a day off from work you might lose £48 from
having sacrificed eight hours of paid work.
O Government spending priorities: The opportunity cost of the government spending
nearly £10 billion on investment in National Health Service might be that £10 billion
less is available for spending on education or the transport network.
O Investing today for consumption tomorrow: The opportunity cost of an economy
investing resources in new capital goods is the current production of consumer goods
given up. We may have to accept lower living standards now, to accumulate increased
capital equipment so that long run living standards can improve.
O Making use of scarce farming land: The opportunity cost of using arable farmland to
produce wheat is that the land cannot be used in that production period to harvest
O Opportunity cost can be looked at through the use of a Production Possibility Curve.…read more