Factors of Production (AS/A LEVELS/IB/IAL)
Factors of Production (AS/A LEVELS/IB/IAL)
Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes
Factors of Production
Factors of production are used to produce goods and services. They can be organised into four categories:
- Land (Farmland, fisheries, ocean, mountains etc.)
This also includes natural resources such as timber which are used in the production of other goods and services.
- Labour (Workers, managers, contractors, policemen etc.)
This is the labour force which is also known as human capital in economics.
- Capital (Machinery, computers etc.)
These are goods used to make other goods and services.
- Enterprise
This is the ability of entrepreneurs to use their knowledge and skills to produce new goods and services.
AQA Spec – Additional Content
The Immobility of the Factors of Production
Unemployment implies that the Labour Markets are not operating as efficiently as they could be
Structural Unemployment – this occurs when there is a decline in industry and workers’ no long possess the appropriate skillsets needed for the job
Frictional Unemployment – this occurs when there is movement from one job to another and is usually temporary until the person finds another job
The Geographical Immobility of Labour
This refers to the obstacles which make it difficult to move the factors of production between different areas
The Occupational Immobility of Labour
This refers to the obstacles which make it difficult to change the uses / purposes of the factors of production.
For e.g labour (workers) not possessing transferable skills
Factor Market
This is a market where factors of porduction are bought and sold. Factor markets allocate factors of production, including land, labour and capital. They also distribute income to the owners of productive resources, such as wages,rent, etc.
Quick Fire Quiz – Knowledge Check
- Define a ‘Factor of Production’ (2 marks)
- Identify and explain the four Factors of Production (8 marks)
Next Revision Topics:
A Level Economics Past Papers
