The Factors of Production SR LR Productivity

The 4 factors of production enterprise/entrepreneurship, labour, land, capital trees, timber, fish, fresh water, sole trader, component parts, cleaning fluid, gutted fish, shareholders funds, partners. Factor Description examples This is any natural resource that is extracted from the earth. In it’s unprocessed state it is the product of primary industries This is the contribution made by hired workers or staff. Each staff member can be measured for his/her productivity This is a person made or processed resource which is more easily used by business to make finished goods. Can also refer to finance. This is the risk taker that starts the business venture off and accepts potential profit or loss from their involvement

The 4 factors of production enterprise/entrepreneurship, labour, land, capital trees, timber, fish, fresh water, sole trader, component parts, cleaning fluid, gutted fish, shareholders funds, partners. Factor Description examples This is any natural resource that is extracted from the earth. In it’s unprocessed state it is the product of primary industries This is the contribution made by hired workers or staff. Each staff member can be measured for his/her productivity This is a person made or processed resource which is more easily used by business to make finished goods. Can also refer to finance. This is the risk taker that starts the business venture off and accepts potential profit or loss from their involvement

In the short run (SR) at least one factor is fixed – usually land capital and/or entrepreneurship What is happening to the productivity of this firm? Graph and conclude.

Add the following labels to your graph TP, AP, MP Benefits of specialisation and division of labour Increasing marginal productivity Diminishing average returns Diminishing marginal returns Negative marginal product

Diminishing marginal productivity or diminishing factor returns Why do these occur? Space and crowding can hinder productivity because… Specialisation is complete so… Equipment may be scarce and therefore… The entrepreneur is less able to effectively direct staff so…

True or false A rise in productivity is always as a result of adding more of a factor When MP is greater than AP the average is rising When MP is less than AP the average is falling Average productivity is likely to be negative at some point When mp = ap the average is constant

Long run production In the long run (LR) it is likely that all factors are variable. The LRAC is often L shaped because economies of scale are limited in each firm and diseconomies of scale can be managed/avoided.

What is happening here?

Effective factor markets need factor mobility What does this mean? Why is it important? What might lead to factor immobility? Land Labour Capital Enterprise What would be the impact on the market for that factor? Think market failure xs D&S