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.
This is the table examiners use as a question template. Memorise it in both directions: given a factor, name the reward; given a reward, name the factor.
| Factor | Reward |
|---|---|
| Land | Rent |
| Labour | Wages (or salaries) |
| Capital | Interest |
| Enterprise | Profit |
The four rewards are sometimes collectively called factor incomes. In a market economy, households own the factors and receive these incomes when firms hire the factors in factor markets.
A common 4-mark exam question: State the four factors of production and the reward earned by each. Full marks come from naming all four factors paired with the correct reward, in any order.
Rewards to the factors of production
Naming the rewards to the factors of production comes up, so you need to know: labour → wages, land → rent, capital → interest, enterprise → profit. "Money" is not a reward, and the easy mix-up is capital (interest) versus enterprise (profit).