Factors of Production

Factors of Production

Meaning : The resources used for producing goods or services.

Factors of Production

Human resources Labor entrepreneur Natural resources Land Man-made resources - Capital

HKCEE 92

Crude Oil---Oil Pump---Fireman----Owners of the oil wells----

HKCEE 92

Crude Oil---- Land Oil Pump---- Capital Fireman----- labour Owners of the oil wells---- Entrepreneur

Types of factors of Production

Human Resources

Entrepreneur

labor

Entrepreneur

Bill Gates: Founder and Chairman of Microsoft Paul Allen: Founder of Microsoft CD-ROM DOS WINDOW

7,000 19581971 197234,200

Who is he?

Li Ka Shing

Labour

Labor refers to the human effort, both mental and physical effort put in production. eg. skills, expertise
Return: wages

Teacher Construction worker Accountant Lawyer ALL are labour (Human effort)

Labor Supply

It is the total number of working hours provided by workers in production.

Labor Supply= total no of workers x working hours per worker

Factors affecting Labor Supply

Working population

Working hours

Labor Productivity

It refers to the average amount of output per worker. Miss Law 10 books 5 hours So, the labour productivity is _________

Labor Productivity

Labor productivity = total labor supply / total product Miss Law 5 hours/10 books = _____

Student A

Doing 5 assignments in 2 hours

What is his productivity? (total labor supply / total product) 5/2= 2.5 assignments per hour

4 factors of Production

Labor Entrepreneur Capital Land

Formulas
Labor= Human effort (Physical+mental) Labor Supply= total no of workers x working hours per worker Labor Productivity= total labor supply / total product

Factors affecting Labor Productivity

What are the factors that affecting your productivity on doing assignment? ( )

Factors affecting Labor Productivity

What are the factors that affecting your productivity on doing assignment? Education and training Tools (Capital) Time management (method) Working condition (noisy)

Factors affecting Labor Productivity

1. 2. 3. 4.

Education and training Quality and quantity of capital used Method of organizing labor Working condition and welfare

Education and training

Higher education and training---- familiar with the working process ---- higher productivity Trading Company Fire station

Quality and quantity of capital used

Capital (Man-made resource) increase ----higher productivity Computer Typewriter

Method of organizing labor

Better method of organizing labor (better job allocation) ---- Higher productivity

Working condition and welfare

Comfortable condition and good welfare ---Higher productivity Air conditioned Free medical service

Mobility of factors
Occupational mobility It is the ease to move from one use to another.

Geographical mobility It is the ease to change from one workplace to another.

Occupational mobility
Compare Worker A and B resume () Worker A : - Age: 24 - University graduate - Good in English and Putonghua - Good in computer uses

Worker B: Age: 60 Primary school graduate Good in Cantonese only Dont know how to use computer

Which worker have higher occupational mobility? WHY?

Geographical mobility

Which resource has higher geographical mobility? Factory Machine

Exercise
Catalyst? () Barrier? () of the mobility Example: More money from other job ---- catalyst ---occupational mobility INCREASE Transport cost increase ---- barrier ----geographical mobility DECREASE

Wage/Salary

Wage/Salary is an important factor to motivate the worker 4 payment methods: Piece rate Time rate Basic salary plus commission Profit sharing

Payment Methods

Piece Rate: workers are paid according to the quantity of output produced.

Factory Payment: pieces of toys

Plucking () grams of fruits

Adv: the more the workers produce, the more they earn Disadv: unstable income

Payment Methods

Time Rate: Workers are paid according to the period of working time.

Teacher

Policeman

Adv: stable income to workers

Disadv: not fair to hardworking workers

Payment Methods

Basic Salary plus Commission/Tips: Workers are paid a basic salary according to time rate and a commission based on performance.

As a balance of piece rate and time rate Insurance Company A: Basic salary: $ 2000 Each insurance policy (): 500 Mr. Lee get 10 insurance policies this month. How much can he get?

As a balance of piece rate and time rate Insurance Company A: Basic salary: $ 2000 Each insurance policy (): 500 Mr. Lee get 10 insurance policies this month. How much can he get? 2000+ 10 X 500 = $7000

Adv: higher income to hardworking workers Disadv: not stable income

Payment Methods

Profit-sharing: workers are paid a certain percentage of profit of their companies as a bonus. Adv: higher income to hardworking workers Disadv: unstable income

Look at the share of Company A Employer (): 50% Worker A: 25% Worker B: 25%

If the company make $1000 profit, how much can worker A?

Look at the share of Company A Employer (): 50% Worker A: 25% Worker B: 25%

If the company make $1000 profit, how much can worker A? $1000 X 25%= $250

Is there any perfect pay method?

Is there any perfect pay method?

No, because the use of pay method are largely affected by the job nature.

Teacher: Stable ---- Time rate Sales: Need more motivation ---- Piece rate

Entrepreneurship

He bears risk and uncertainty The return is profit

Mr Wong is a hawker, is he an entrepreneur????

2009

Risk + Profit
Bear the risk and return for the profit (): 6%402.48--- 2008429.12 12%347.41 2008394.75 51%50.192008102.47 57%33.472008 77.22 6.4%200812.1% 63%0.21---20080.57

The difference between entrepreneur and labor:

Entrepreneur: Make decision + provide capital Labor: Follow the decision and receive wage

Think: Is hawker an entrepreneur?

Land

Land refers to all natural resources used in production. The return is rent

Land

Land CANNOT be made by human beings and its supply is fixed. The production does not involves opportunity cost . Land is geographically immobile. Land is occupationally mobile: can change from one use to another.

Land

Is reclaimed land land??

Land

Geographically IMMOBILE: Once people move it to another place, the resource will not be the land anymore Occupationally MOBILE: Land can change from one type of job to another

Capital

It refers to man-made resources used for further production. The return is interest.