Title: Factors of production
1Factors of production
- inputs
- resources for production
- Four types
- Land
- Capital
- Labour
- Entrepreneurship
2Land
- natural resources used for
production - e.g. sunshine rain
3Characteristics of land
- A gift of nature
- As land is not created by men the opportunity
cost of creating land is _________.
- Any opportunity cost of obtaining land
4Characteristics of land
- Because the supply of land cannot be
increased by human efforts.
5Characteristics of land
- Land is geographically immovable
- The location of land is decided by nature and
cannot be moved from one place to another place.
- Can we move coal
- Can we move a coal mine
Coal (a primary product) coal mine (land)
6Capital
- man-made resources (or resources
made by men) to assist production - e.g. machines tools and equipment
Why should we use capital E.g. A fisherman can
catch two fishes by hand in one day. He has to
use three days without catching fish to make a
fishing net. Is a good for him to make the
fishing net Why
7Characteristics of capital
- Capital is man-made
- Increase in productivity
8Different terms of capital
9Related concepts of capital
- Capital formation the production of capital
goods - Depreciation of capital
- Capital consumption the wearing out of capital
goods - Capital obsolescence capital goods become
obsolete or useless because of technological
changes - Capital maintenance the process of replacing
capital goods - Capital accumulation an increase in capital
goods due to capital formation is faster than
capital consumption
10Labour
- human efforts both mental and physical
used in the production process.
11Characteristics of labour
- Human resources
- Rest and leisure are important (psychological
effects) - There are some ways to increase labour
productivity (e.g. education and training)
12Labour supply
- is measured by the total working hours of
the workers involved in production - Why not measured in terms of the number of people
of a country - Because not all the people work
- Why not measured in terms of the number of
workers of a country - Because not all workers have the same working
hours each day
13 Factors affecting labour supply
- Birth rate - Death rate - No. of immigrants -
No. of emigrants
Size of population
Size of working population (age 15-60)
Labour laws -No. of working hours per day (and
working days per week) -No. of holidays per
year
No. of working hours
14How to increase labour supply
- Natural growth - Immigration
Population growth
Improving the health of labour
- Raising the retirement age - Lowering the
school-leaving age
Greater monetary rewards (higher wages)
Importation of foreign labour
15Labour supply
- Worksheet
- Study the following table and find which country
has a larger labour supply - Country H Country
K - Population size 6.7 million 9 million
- Percentage of population that works 82
65 - Number of working hours per day 8 hours
7 hours
16Labour productivity / efficiency
- measures the output per worker per unit of
time (e.g. output per man- hour) - E.g. Worker As productivity is 10 toys per
man-hour whereas Worker Bs productivity is 13
toys per man-hour - Which of the above workers has a higher
productivity - Worker B
17 Factors affecting labour productivity
Rewards and benefits
Education and training
Health of workers
Quantity and quality of capital goods -
mechanization
Division of labour
18Labour productivity
- The following table shows the data about the
banking sector in Hong Kong. Find the average
annual productivity growth rate of the industry
between 1995 and 2000. - Year 1995 2000
- Number of employees 358478 406545 Value of total
output (million) 248866 326540
19Comparison
- Which one is more important labour supply or
labour productivity
20Comparison
- Given Two countries with same labour
productivity but Country A has larger labour
supply than Country B. - Which country can produce more goods and
services - Country A
- Which concept is more important labour supply or
labour productivity - Labour supply
21Comparison
- Given Two countries with same labour supply
but Country C has lower labour productivity
than Country D. - Which country can produce more goods and
services - Country D
- Which concept is more important labour supply or
labour productivity - Labour productivity
- So both concepts are important
22 Different types of wage payments
Profit-sharing scheme
Piece rate
Basic salary plus commission / tips
23Different types of wage payment
- What determines the type of wage payment to be
used - It depends on the nature of the production the
labour involved.
24Piece rate
- Wage is paid according to the quantity of output
produced - i.e. 100/shirt
- Is is good to calculate the wage of a teacher by
piece rate Why - Nature of production output can be measured
easily (e.g. standardized goods)
25Time rate
- Wage is paid according to the total amount of
working time. - e.g. wage/hour wage/month
- Examples wages of teachers / civil servants /
domestic servants / secretaries - Nature of production output is difficult to
measure (non-standardized goods)
26Basic salary plus commission tips
- Commissions a of the sales volume
- e.g. insurance /property agents
- Tips extra given by consumers
- e.g. waiters
- Nature of production services (e.g. marketing
retailing and catering industries)
27Profit-sharing scheme
- Bonus is given in addition to salary ( of net
profits earned by the firm) - e.g. year-end bonus in banks
- Nature of production trading
- e.g. managers and (CEO)
- i.e. Chief Executive Officer
28Comparison of different types of wage payments
- Table 4.2 on P.68
- Words you should know
- Incentives
- Cost saved
- Quality of goods
- Supervision / Monitoring
- Easy to administer
29Entrepreneurship
- Entrepreneurship refers to human efforts which
organize all resources make decisions and bear
risks. - Entrepreneur is the owner of a firm who has to
make decisions and bear risks.
30Mobility of resources/factors
- Two types of mobility
- Occupational mobility - the ease of resources
to move from one job/use to another job/use - Geographical mobility - the ease of resources
to move from one place of work to another
31Mobility
- Occupationally mobile vs occupationally
immobile - Geographically mobile vs geographically
immobile - High / low occupational mobility
- Increase / decrease geographical mobility
32Occupational mobility
- Assumption Other things being equal
- Monetary reward wages bonus
- Low wage jobs --gt high wage jobs
- Non-monetary rewards social status promotional
prospect job satisfaction - Low --gt high
33Occupational mobility
- Skill of workers
- Skilful workers / professionals - Lower
occupational mobility - Higher opportunity
cost - Trade unions and professional associations
restrictions - Membership --gt licence or work permit - Low
occupational mobility
34Occupational mobility
- Age of workers
- Older workers - lower occupational
mobility - slower learners to new skills
35Geographical mobility
- Transportation
- More convenient (less time-consuming)
- Less costly or expensive
- ---gt Geographical mobility increases
36Geographical mobility
- Political factors
- Political unrest or instability
- Uncertainties or high risk
- Wars
- --gt higher geographical mobility
37Geographical mobility
- Home country economic conditions
- Low standard of living
- High unemployment
- Low pay
- Famine
- --gt high geographical mobility
38Geographical mobility
- Foreign country economic conditions
- High standard of living
- Low unemployment
- High pay
- --gt high geographical mobility
39Geographical mobility
- Social factors
- Serious racial / sex discrimination
- Language barrier (language difference)
- Different customs and ways of living
- --gt high geographical mobility
40Geographical mobility
- Immigration and emigration regulations
- Stricter foreign immigration policy
- Stricter home emigration policy
- --gt low geographical mobility
41Geographical mobility
- Immigration and emigration regulations
- Stricter foreign immigration policy
- Stricter home emigration policy
- --gt low geographical mobility
