Ch. 8 FACTORS OF PRODUCTION

P.151 Resources are used for production & are classified as: human resources - labour and entrepreneurship natural resources – land man-made resources – capital These resources are called the factors of production. Factors of production are the resources used in production.

Labour Factors of Production Land Capital Entrepreneurship

P.151 8.1 LABOUR LABOUR Mental and physical human effort used in production.

Labour Labour is a factor of production that provides physical and mental human efforts in any production activity.

Labour quantity of labour labour productivity (1) The size of the population (1) Education and training (2) Quantity and quality of capital and the use of new technology (2) The proportion or % of the working population (3) Method of organising labour / management (3) Amount of Work = Number of working hour (4) Better incentive scheme (4) Better working environment

Labour supply and labour productivity Labour is measured in terms of man-hours. A man-hour is the amount of effort put by a worker in one hour. Labour supply = number of workers x working hours of each worker

(1) The size of the population Quantity of labour (1) The size of the population Birth rate, death rate, immigration and emigration affect the population size. Generally speaking, a larger population will have a larger labour supply.

Quantity of labour (2) The proportion of the working population Two countries may have the same population size but different % of working populations. An economy which has a larger proportion of working population has a larger labour supply.

Quantity of labour (2) The proportion of the working population The proportion of the working population is, in turn, affected by the composition (age & sex) of the population.

Figure 6.1 Age distribution of Hong Kong’s population 1995 1999 2000 Year 90% 100% 80% 70% 60% 50% 40% 30% 20% 10% 0% Percentage Age: 9.8% 10.9% 11.2% over 65 70.8% 71.5% 71.6% 15-65 under 15 Source: Hong Kong in Figures 2000 19.4% 17.6% 17.2%

Population pyramid 1961

Population pyramid 2001

Total population Working population

(3) Amount of work = Number of working hour Quantity of labour (3) Amount of work = Number of working hour The amount of work a worker does depend on how many hours each worker is willing to work, the working capacity of each worker and the incentive to work.

(3) Amount of work Quantity of labour For instance, if the tax rate on income is very high, workers may supply less labour service. If the promotion prospects and working relationship with colleagues are good, workers are willing to work longer hours.

Hong Kong people work very long hours

P.154 Mastering econ data 8.1 Country A Country B Population size 8 million 10 million % of working population 70% 60% No. of working hours 46 hours 40 hours Labor supply 257.6 million man-hours 240 million man-hours

Factors因素affecting影響the labour勞工quality or productivity 生產力 The average labour productivity is the quantity of output produced per unit每單位of labour, for example, output per man-hour. (improve = more) Average Product = Total Output or Total value of Output Units of Labour (in man- hours)

Labour quality/productivity (1) Education教育and training訓練 Educated workers are usually more open to new ideas and practices. They are also more ready to learn new skills. Workers who are trained are more skilful at their jobs.

Labour productivity (1) Education and training Technical education and on-the-job training improves workers’ technical know-how. Workers can produce more output. 訓練後 訓練前

(2) Quantity and quality of capital and the use of new technology P.155 Labour productivity (2) Quantity and quality of capital and the use of new technology Workers can be more productive if there are sufficient machines and tools. New technology can give an even greater output with the same input of labour.

(3) Method方式of organising labour / management管理 P.156 Labour productivity (3) Method方式of organising labour / management管理 When a labour force is organized properly, they will have higher productivity. Good management can enhance the efficiency of a labour force through better co-ordination and achieve an increase in productivity.

(4) Better incentive scheme P.156 Labour productivity (4) Better incentive scheme Good promotion prospects and fringe benefits, such as medical insurance and a housing allowance, can increase the working incentive. It will lead to improved job performance.

(4) Better working environment P.156 Labour productivity (4) Better working environment A better working environment, with good lighting, ventilation and air-conditioning, etc., can also increase labour productivity.

P.156 Labour productivity (4) Better working environment Workers can work better in a clean and tidy working environment with air-conditioning and good lighting.

1) Total working hours of firm A = ____________ = ______________ Number of workers employed Number of working hours per worker Units of output produced Firm A 100 100 8 8 48,000 Firm B 90 10 49,500 1) Total working hours of firm A = ____________ = ______________ 100 x 8 hours 800 man-hours

2) The productivity of firm A is = _________________ Number of workers employed Number of working hours per worker Units of output produced Firm A 100 8 48,000 Firm B 90 10 49,500 2) The productivity of firm A is = _________________ = ____________________________ 48,000 units 800 man-hours 60 units of output per man-hour

3) Total working hours of firm B = _____________ Number of workers employed Number of working hours per worker Units of output produced Firm A 100 8 48,000 Firm B 90 90 10 10 49,500 3) Total working hours of firm B = _____________ = ______________ 90 x 10 hours 900 man-hours

4) The productivity of firm B is = _________________ Number of workers employed Number of working hours per worker Units of output produced Firm A 100 8 48,000 Firm B 90 10 49,500 4) The productivity of firm B is = _________________ = ____________________________ 49,500 units 900 man-hours 55 units of output per man-hour

Number of workers employed Number of working hours per worker Units of output produced Firm A 100 8 48,000 Firm B 90 10 49,500 5) As a result, firm A has a higher average labour productivity than that of firm B.

6) Labour productivity = Total output / Total number of man hours workers employed Number of working hours per worker Units of output produced Firm A 100 8 48,000 Firm B 90 10 49,500 6) Labour productivity = Total output / Total number of man hours P.157 MED 8.2

P.158 Different types of wage payment systems PPT Presentation