Factors of Production
Basic Economic Problem · 3 question types
Exam Frequency Analysis
Past paper frequency (2018 to 2024)
This topic accounts for approximately 6% of your exam marks.
Four factors and their rewards appear occasionally; usually 2 to 4 marks when tested, not on every paper.
It helps to see all four factors at work simultaneously. Take the production of a single loaf of bread sold by a high-street bakery.
| Factor | Example for a loaf of bread |
|---|---|
| Land | The wheat field where the grain was grown; water used in the dough; the natural gas burned in the oven |
| Labour | The farmer harvesting the wheat; the miller; the baker mixing and shaping the dough; the shop assistant selling the loaf |
| Capital | The combine harvester, the milling machinery, the kneading mixer, the industrial oven, the bakery's display shelves and till |
| Enterprise | The bakery owner who decided to open the shop, hired the staff, sourced the equipment and bears the risk of slow trading days |
Every produced good and service can be broken down the same way. A car is another clear example: its inputs are iron ore, rubber, oil, sand and leather from cows; its capital is the robotic arms, conveyor belt, rolled steel, computers, seats, dashboards and mirrors; its labour is the car designer, production director, production line staff and supply chain staff; and its enterprise is the CEO who organises the venture and bears the risk.
A common Paper 1 MCQ trap: presenting a man-made input (fertiliser, electricity, packaging) as if it were a "natural resource" because it looks similar to one. Fertiliser is because it is man-made, even though it ends up on a field with wheat.