RESOURCES USED FOR PRODUCTION

1. Factors of production
 Resources used for production
 Types:
 Land
 Capital
 Labour
 Entreprenuership

2. Land
 Natural resources
 Characteristics
 A gift of nature
 Limited in supply
 Land is immovable
 The supply of land involves no opportunity
cost

3. Capital
 Man-made resources used for further
production
 Examples: machines, raw materials, tools
 Features:
 Man made
 It raises the productivity of other factors

4. Land or Capital?
 Ice at Mount Everest
 Ice in a skiing field
 Sea water
 Sea water in a seafood restaurant
 Sharks in the Atlantic Ocean
 Sharks at the Ocean Park

5. Human Resources
 Labour
 Entreprenuership

6. Labour Supply
 Measured in terms of time (man hour)
 Labour supply = no. of workers x no. of
working hours per worker

7. Labour Supply
 Measured in terms of time (man hour)
 Labour supply = no. of workers x no. of working
hours per worker
 Factors affecting labour supply:
 Size of population
 Size of working population
 No. of working hours

8. How to increase labour supply?
  population growth (by natural growth or
immigration)
  monetary rewards
  import of labour from other countries
  retirement age (e.g. from 60 to 70)
  school leaving age (e.g. from 16 to 17)

9. Labour productivity
 Measured in terms of output per unit of
labour
Average labour productivity = average output per man hour
June 2005 Firm A Firm B
Number of working hours per worker 240 180
Units of output 7200 6400
Average labour productivity 30 35.6
Firm B has a higher labour productivity than firm A

10. How to raise labour productivity?
 Better education and training
 Other factors of production( quantity &
quality)
 Better management or organization. e.g.
division of labour
 Better working conditions
 Greater fringe benefits (housing
allowances,medical care,bonus, meal..)

11. Mobility of Labour
 Geographical mobility: the ease at which
labour can move from one working place to
another.
 Occupational mobility: the ease at which
labour can change from one type of job to
another

12. Factors affecting occupational
mobility
 Monetary / non-monetary rewards
  income of the present job (higher
opportunity cost in changing job)
mobility 
 Specialization of skills   mobility 
 Licensing requirements   mobility 
 Higher age of workers  mobility 

13. Factors affecting geographical
mobility of labour
 Transport
 Social factors
 Economic conditions ( home country/other
countries)
 Political stability
 Immigration or emigration restrictions

14. Factor returns
 Rent
 Interest
 Wage
 Profits