Essay On Factors Of Production

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Recommended: Factors of production and their rewards

In this essay I will be talking about the 4 factors of production and the production possibility frontier and why some economies operate within the production possibility frontier and factors that cause the Production Possibility Frontier to shift outwards making the economy more efficient. The four factors of production are land, labour, capital and enterprise. Land is the natural resources available for production. Some nations are lucky enough to have the resources within their country and don’t have to import resources, for example oil or copper. Land: Nothing is free, except the air we breathe. The rest are scarce, because there are not enough natural resources in the world to satisfy the demands of consumers and producers. That is the economic problem, people’s wants are never-ending but the resources are insufficient to fulfil their demands. Air is classified as a free good since consumption by one person does not reduce the air available for others - a free good does not have an opportunity cost. Labour: The human input into the production process. “In the UK, of about 59 million inhabitants only approximately 35 million are of working age (16-64 years for men and 16-59 for women), and of those about 28 million have paid jobs.”- (Tutor2u, N.D) Owners of businesses prefer their workers to be motivated, meaning that they have the desire to work effectively and in reward wither benefit from extra pay or fringe benefits. The more produced by the labour force, the higher the Gross Domestic Product. Capital: “Capital has several meanings - including the finance raised to operate a business. But normally the term capital means investment in goods that can produce other goods in the future.” – (Tutor2u, N.D) Capital refers t... ... middle of paper ... ...ficient. In conclusion, as a country works towards shifting the production possibility frontier outwards, the economy benefits by the fact that more jobs are being created as more products are being supplied. With the improvement of technology countries can exploit their resources more efficiently which causes more production, with more production come more sales and with more sales or exports there might eventually be an increase in economic growth. However, with more production come more external costs like pollution. Identifying and estimating a monetary value for air pollution can be very difficult to do but is important for economists concerned with the impact of economic activity on our environment. Besides the externalities, shifting the production possibility frontier outwards will create more jobs in the economy and that is a very good thing indeed.

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