FACTORS OF PRODUCTION o Investment – This refers to the spending on capital goods.

IMPORTANT TERMS AND o Gross investment - Total spending on capital goods.

DEFINITIONS o Depreciation (capital consumption) - The value of capital goods that have worn out or become obsolete.
o Net investment - Gross investment minus depreciation. The value of capital after deducting the value lost (depreciation)

Investment: o Negative net investment – Gross investment may be lower than depreciation. This means that some of the capital goods taken out of
o spending on capital– The economic
Factors of production use, are not replaced
goods.
resources
Grossof land, labour, capital, and
investment: o Quality - The standard of something as measured against other things of a similar kind; the degree of excellence of something.
total
enterprise spending on

o Occupationally mobile - This means Occupationally Mobile – This means that land has many different uses. Land can be used for
that the production factors can be used farming but can also be used to build houses or office buildings.
capital goods. FACTORS OF
for a number
Depreciaofonpurposes/uses.
PRODUCTION: Geographically immobile – Land cannot be moved from point A in one location to point B in
o (capital immobile - This means
Occupationally
consump on): the MOBILITY another location. A coal or diamond mine cannot be moved from India to China.
that the production
value of capital factors
goods cannot be
thatahave
used for wornof
number out or
purposes/uses
become obsolete.
o Geographically immobile - It is not
Net investment:
gross
possible toinvestment
move the productions 1 Land Occupationally Mobile – Workers can do many different jobs if they receive the correct training,
minus deprecia on.
factors fromveone
Nega netpoint to another. Natural resources from Occupationally Immobile - Some workers may find it difficult to switch from one type of job to
o investment:
Geographically mobile a - It is possible to the earth which are used
reduc on in the in the production process. another type
move number
the productions
of capital factors from one
point goods caused by some
to another. Geographically immobile – Some workers may find it difficult to move from one area to another
o
obsolete and worn
Entrepreneur - agoods
person
2 area.
out capital not who bears the Labour
beingmakes
risks and replaced.
the key decisions in a Geographically mobile – Some workers may find it easier to move from one area to another
Human efforts. Mental area.
business. and physical effort
o Renewable resources - for example when producing a good
or service. Offices and
wind power, are replaced by nature and factories are built Reasons (Causes) why workers are geographically immobile:
can be used again and again.
1. Differences in the price and availability of housing in different areas and countries
o Non-renewable resources - for
2. Family ties – They don’t want to leave their family
example gold and oil, are reduced by
use and cannot easily be replaced. 3. Differences in educational systems in different areas and countries
o Labour force - people in work and those 4. Lack of information – There is not enough information available about the new location
actively seeking work.
5. Restrictions on the movement of workers (VISA) – Workers may find it difficult to work in a
o Quantity - The amount or number of a foreign country without the correct legal papers
material or immaterial thing.
 Occupationally mobile – Some capital goods, like a delivery truck, can have many different uses. A delivery truck which was originally used to
delivery flowers can also be used by a company to deliver food packages.
FACTORS OF
PRODUCTION: Occupationally Immobile - Some capital goods, like a coal mine, do not have many different uses. A coal mine is used to mine coal. It cannot be
MOBILITY used to mine diamonds and gold.

Geographically immobile – Some capital goods like an office building, factory or coal mine cannot be moved from one location to another
location.
3 Capital
Geographically mobile – Some capital goods like a computer or a photocopier (printer) can be moved from one location to another location.
Any human-made
(manufactured) good
used to produce other
products or services Occupationally Mobile – Entrepreneurs can do many different jobs if they receive the correct
education and training. They can use their skills and knowledge for different purposes.
NB!
4 Enterprise Geographically immobile – Entrepreneurs can decide not to move from one location to another
location. Enterprise is the most
Entrepreneurs = People
who organise the other 3 mobile factor of
production factors Geographically mobile – Entrepreneurs can decide not to move from one location to another production. The
(labour, capital, and land) location. mobility of enterprise
and uses these factors to
grow their business is dependent on the
entrepreneur
 1. The size of the popula on.
FACTORS OF PRODUCTION: QUALITY AND
LAND QUANTITY 2. The age structure of the popula on.

3. The re rement age.

1. Renewable resources 4. The school leaving age.
2. Non-renewable resources LABOUR
5. A tude to working women
QUANTITY

o There is a risk that renewable

resources can be turned into non- The quan ty of labour is influenced by
1. The length of the average working day
renewable resources if they are two key factors:

QUANTITY
2. Whether they work full or part- me
overexploited. Over-fishing and 1. The number of workers available 3. The dura on of over me
the hun ng of wildlife 2. The number of hours for which
4. The length of holidays taken by
they work.
workers
1. Fer lisers
QUALITY

5. The amount of me lost through

2. pollu ng
1. Be er educa on sickness and illness.
3. Good drainage for trees

QUALITY
2. Be er training
3. More experience
4. Be er healthcare.
NB!
ENTERPRISE
Those people who are
working and those seeking
work form the labour force.
o A good educa on system, including
university degree courses in economics The quality of enterprise can be
QUANTITY

and business studies = develop improved if entrepreneurs

QUALITY

entrepreneurs in an economy
receive be er educa on, be er
o Lower taxes on firms’ profits (corporate
taxes) and a reduc on in government training, be er healthcare and
regula ons = encourage more people gain more experience.
to set up their own businesses.
 CAPITAL
o Quan ty of capital is influenced by
investment
QUANTITY
o Farm barn may fall down, and some
machinery may be replaced by newer,
more efficient machinery.
GROSS INVESTMENT
Total spending on capital goods.
Nega ve net investment =
Gross investment may be lower than
deprecia on. This means that some of
the capital goods taken out of use, are
not replaced
Advances in technology enable capital
QUALITY
goods to produce a higher output and a
be er quality output.
DEPRECIATION NET INVESTMENT
o Some of the capital goods being Net investment is the value of
produced will be replacing those the extra capital goods made. It
which have worn out or become is equal to gross investment
obsolete. minus deprecia on
o The value of replacement capital is
called deprecia on or capital
consump on.
o Firms pay wages for the services of the workers.
o For bearing uncertain risks and organising the other
factors of produc on, entrepreneurs earn profit.
o Land receives rent PAYMENT FOR THE
PRODUCTION
o Interest is a payment for capital.
FACTORS