BASIC FACTORS IN BUSINESS

In our study of business, it is necessary to understand the four basic factors of

production. These four factors are land, labor, capital, and entrepreneurship. What is
meant by these four terms?

ln order to produce things, it is necessary to use land. Here, the term land is used in
the most general way. It refers not only to a piece of real estate where we might build
a factory, but it also means all the raw materials used for production. Some of these
raw materials are found on the earth’s surface, such as trees, which yield wood for
lumber. Other raw materials are found under the earth’s surface in mines and oil
wells, and still other raw materials may be extracted from the air. All the raw
materials for production come from the land, the air, and the oceans.

Labor refers to the use of mental or physical work to produce goods. Most labor
changes raw materials into finished products and then distributes these to buyers. In
industrialized countries, labor is generally more mental than physical. For example,
in both manufacturing and agriculture, machines accomplish the very tiring physical
work that unskilled laborers used to do. In other industries computer programmed
robots and other forms of data processing equipment perform many of the jobs
which used to require a lot of mental labor.

As one of the basic factors of production, capital is all of the things that make use in
production and distribution. lt includes theirs tools, machines, and buildings, such as,
factories and warehouses where goods are produced and stored. To a certain extent
factor, capital, can be used to replace labor or reduce the amount of physical and
mental labor that humans have to use in order to conduct business. Capital,
therefore, refers to anything which helps to produce and distribute goods.

Putting together land, labor, and capital to make something of value, is called
entrepreneurship. The entrepreneur is the person responsible for controlling and
directing the other three factors. Entrepreneurship includes some other important
activities. The entrepreneur is responsible for initiating business activities. He must
begin his business by bringing together land, labor, and capital. Next, he must
manage the business by deciding the general policies for business operation.
GLOSSARY
entrepreneurship (n) : Kewirausahaan

surface (n) : permukaan

mines (n) : tambang

manufacture (n) : pabrik

accomplish (v) : mengerjakan, menyelesaikan

ware houses (n) : gudang

A. COMPREHENSION QUESTIONS
Answer the following questions based on the text above.
1. What are the basic factors in business for production?
2. What is the function of land in producing things?
3. Where are the sources of raw material?
4. What is the role of labor in doing business?
5. If we want to produce and distribute goods, what might be involved in capital?
6. What do you know about entrepreneurship?
7. Do you agree if capital is the most dominant factors in business? Why?
8. How does businessman manage their business?

Select the answer which best completes the meaning of the

sentence.
1. Advertising is a kind of public announcement which describes the benefits of using
a product or service. We can use advertising to increase the sales of our product or
service. We expect to find advertising.

a. at school c. on the land

b. in the factory d. on TV and Radio
2. There is an expression,"lt takes money to make money". We know that capital can
be used to make something of value. Therefore, capital can refer to
______________

a. a basic factor c. raw materials

b. money d. bankruptcy

3. Labor changes raw materials into finished goods. Paper is an example of a

finished good. The raw material would be ___________
a. physical work c. finished products.
b. wood d. land

4. Distribution means getting the products from the factory to the store where
customers buy them. Which of the following companies would probably be
involved in distribution ?
a. a bank c. a supermarket
b. a transportation company d. innovation

5. A creditor is a person to whom the business owes money. Which of the

following is most likely to be a creditor?
a. an entrepreneur c. a banker
b. an employee d. a factor

6. Large companies require more capital than a single entrepreneur could

supply. The ownership of the company is therefore divided into shares of
stock. ln order to raise capital, a company might _________
a. risk its future c. sell stock
b. bring together land and labor d. produce goods
7. Value is the quality that makes a thing wanted or worth having. Value is
probably _______
a. skill c. price
b. capital d. profit

8. Business provides both goods and services. Examples of goods are physi-
cal products which customers purchase to take home. An example of a
service business would be ___________
a. an oil company c. a bank
b. a store d. a factory

B. VOCABULARY BUILDING
Rewrite each of the following sentences replacing the underlined
words with the correct form of the words provided.

entrepreneur shares in the risk creditors

employees goes bankrupt capital
1. Everyone connected with a business takes a chance.
2. When a company defaults on its debts, it causes problems for many people.
3. Workers may have to seek employment elsewhere.
4. The owner of the business takes the greatest risk.
5. People to whom the company owes money may lose.

C. STUCTURAL REVIEW: Direct and Indirect Object

I. Direct object
Subject Verb Direct Object
We understand the four basic factors of production
Labors change raw material
You buy land
II. Indirect Object
Subject Verb Indirect Object
The employee told me
The sellers serve their customers

III. Direct and indirect objects in the same sentence.

Subject Verb Direct Object Indirect Object
The reporting agency gives data to us
The company cannot give that information to the workers

Restate each of the following sentences changing the word order

as in the example.

Example:
They’ll give us that information.
They’ll give that information to us.
1. The credit bureau sends them data.
2. The Federal Corporation offered its customers new products.
3. Mr. John will bring us a profile of expense.
4. I owe the bank the next installment.
5. The marketing department wrote her a letter.
6. They are going to pay him the balance.
7. We have offered Lisa and Frank a new contract.
8. Did you give them the information?
9. I will lend you some money.
10.The manager should tell his staff the news.
Organize the following strings of elements into sentences including
direct object and indirect object pronouns.

Example: Money / l / her / owe

l owe her money.
1. a loan/give/the borrower/the lender
2. us/send/data/they
3. that bank/them/credit/extend
4. write/the general manager/me/a contract
5. you/him/furniture/buy
6. she/bring/something/him
7. show/the budget/Charles/me
8. tell/he/good views/friends
Organize the following strings of elements into sentences as in the model. Use the
past tense. Note: the verbs of sentences 2, 3, 5 and 7 require the preposition "to"
before the indirect object.
Example: he/tell/her/he/working
He told her he was working.
1. We/write/them/we/paying on time
2. l/explain/him/they/investigating/his characters
3. She/mention/you/she/co-signing/a loan
4. Mr. Ferguson/tell/us/he/not extending/more credit
5. the bank/say/it/calculating/annual/percentage rate
5. you/inform/the secretary/you/applying/for consumer
7. they/admit/you/they/defaulting/on the loan
8. he/show/me/he/receiving/a lot of data