Factors of Production

Question 1

What are F.O.P?

Answer 1

The economic resources that are used to produce g/s
eg. land is used for farming of coconut trees
-all the inputs used in the production of goods and
provision of services.

Question 2

What are the four factors of production?

Answer 2

Land, Labour, Capital, Entrepreneurship

Question 3

Why are F.O.Ps employed by producers?

Answer 3

To produce more g/s

Question 4

FOPs earn their rewards for their use in production. These are:

Answer 4

Land= rent rewards
Labour= Wages rewards
Capital= Interest rewards
Entrepreneurship= Profit rewards

Question 5

What is land?

Answer 5

all factor services available naturally eg. sunshine, oil, natural gas,iron
- Land is immobile
- Land is fixed
- Land has no cost of production

Question 6

What is capital?

Answer 6

Capital refers to physical assets that are used to produce more goods. These are all items that go into producing other things eg. machinery, tools etc. (Producer goods)
- Capital goods are man made
- Capital goods mobility depends on size and job eg. sewing machine vs crane
- Can be imported from other countries
- Can be a substitute for labour

Question 7

What is the importance of capital goods?

Answer 7

It makes labour and land more productive
It can substitute labour

Question 8

What are the factors affecting the productivity of capital goods?

Answer 8

• maintenance and repairs to machinery
  -Improved technology can force firms to purchase new capital goods that expand their capacity to produce
  -depreciation (wear and tear cost) will affect quality and therefore rate of output

Question 9

What is Entrepreneur?

Answer 9

It combines all the other F.O.Ps in a profitable manner and bears the risk of production.
The risk is that they pay for the factors required to produce g/s.
They organize and coordinate the other inputs.

Question 10

Characteristics of Entrepreneur?

Answer 10

• he coordinates FOPs and undertake all risks
• He makes the decision to recruit all workers
• He will undertake research and development to innovate and invent new products
  -Sourcing funds to purchase capital goods and to fund working capital

Question 11

What does labour refer to?

Answer 11

Labour refers to the people who are available for work in the economy
-only the worker can sell his services
-labour services cannot be stored in the same way as units of land or capital
-is geographically and occupationally more mobile than land
-is not homogenous i.e each unit of labour has different skills and abilities.
NB:
Mobility is the ease with which a FOP can move from one place to another
(geographical mobility) or one occupation to another (occupational mobility). Read
Text, Bahall page 91-92.

Mobility is the ease with which a FOP can move from one place to another

Text, Bahall page 91-92.