Factors of production

What are factors of production?

• Explanation

• distinction between two things

= the resources we have available to produce goods and services.

• we make a distinction between physical and human resources.

What is land?

• explanation

• example

• example/explanation countries

= all natural (physical) resources

• Countries with huge natural factor endowment (Ausstattung and natürlichen Faktoren) specialize in the extraction and production of these resources:

  • Arabic countries (oil and gas)

  • African countries (precious metals)

  • Canada / USA (gold, farmland)

  • Iceland (Thermal energy)

• Countries with small natural factor endowment are reliant on importing and processing the resources:

  • Japan (fourth largest economy but dependent on oil)

  • Germany (third largest econoymy but dependent on gas and oil)

→ e.g. oil, fish, fertile farmland, temperate climate, wind / solar / thermal energy)

What is labour?

• explanation

• solutions to get qualified workfoce

= Human input into the production process

• some workers are more productive than others because of training, education and experience

• increase in size and quality of workforce vital to economic growth

What people can do to get qualified workforce:

1. better education (their own eople)

2. migraton of skilled labour (Zuwanderung von Fachkräften)

What is capital?

• explanation

• further information

• capital types

= not money invested in stock market or bank accounts, but investment in capital goods that can be used to produce other consumer goods and services

• fixed capital (Anlagekapital): inclueds machinery, plant and equipment, new technology, factories … (cannot be consumed, only for necessary production)

• working capital (Betriebskapital): finished goods (Fertigerzeugnisse) and semi-finished goods (Halbfabrikate) that will be consumed in the near future or will be made into finished consumer goods

  • things are not raw materials and can be used to produce sth else

→ e.g. steel, sugar, aluminium, microchips

What is enterprise?

• explanation

• example

= entrepreneur = an individual who aims to supply products to a market for a rate of return (e.g. to make a profit)

• they invest their own financial capital in a business and take on all risks associated with it

• their reward is the profit made from running the business

→ enterprise combines the other factors in new and efficient ways through technology

→ they use the highest technology to have the best outcome and highest profit