New Topic: Production

This is the creation of goods and services that are capable of satisfying consumers’ needs and
wants.

Productivity

This is the extent to which a business uses its resources to produce goods and services.

Formula to calculate productivity: Output ÷ Input

Factors of Production

These are the inputs necessary in order for production to take place.

Types of factors of production

a. Land/Natural Resources- these are the natural resources that are used in the production
of goods and services. Land doesn’t only refer to the soil but to all natural resources or
‘gifts’ of nature such as sunshine. Rainfall, forest, seas, minerals etc
b. Labour/ Human Resources- labour refers to the energy, skills and talents that are used
in the production of goods and services.
Labor can be classified as:
i. Skilled- this means having a special ability to perform a task such as engineers,
teachers, lawyers etc
ii. Semi-skilled- having a partial ability to perform a task eg an apprentice
iii. Unskilled- someone who possesses no special ability eg vendors or watchmen

Factors that determines a country’s labour force

i. The rate of growth of the population- if the population is growing at a faster

rate and migration is constant, then, the labour supply in the country will increase
ii. The structure of the population- an aging or very young population would mean
a smaller labour supply. Additionally, if it is the policy of the government to retire
citizens at an early age, then, this too will restrict the supply of labour
iii. Cultural patters and religious beliefs- if women are not allowed to work, the
availability of labour will be adversely affected
 iv. Economic conditions - in some countries the ‘family wage’ is sufficient and this
doesn’t require wives to work
v. Quality of the labour force- if the population has the appropriate skills and is
healthy, this will be reflected in the labour supply

Efficiency of Labour

The efficieny of labour can be influence by:

i. The level of technology used

ii. The management style of the leader
iii. The salary or wage offered
iv. The opportunities that exist for promotion
v. The nature of the job itself

3.Capital/ Man-made Resources

Capital refers to the money and all the other assets that are employed in the process of
production. It include such things as buildings, machinery, motor vehicles, tools, equipment etc

Types of capital

i. Fixed capital- these are items that remains in the business for very long periods of
time and is used in the production of further wealth eg buildings, machinery, tools
ii. Working capital- these are used up in the day-to-day operations of a business eg raw
materials, cash, stationery etc

4. Enterprise/Entrepreneurship

The entrepreneur is the individual that organizes and coordinates the factors of production
( land, labour and capital) in order to provide goods and services.

Entrepreneurs take calculated risks to provide goods and services with the aim of making a
profit in the process.

Rewards of the factors of production

i. Land –Rent
ii. Labour –Wages/salaries
iii. Capital/man-made resources- interest
iv. Enterprise/entrepreneurship- profit