Raw materials used to create Products
Factors
Land
All natural resources. These are all free. We take this for granted.
- Land is fixed in quantity
- Land has original and indestructible properties
- Land lacks geographical mobility
- Land differs in fertility
Labour
Any work that is manual or mental. It requires human effort. Laws around labour came about one we realized that labour is important.
- Labour must come from a labourer. The labourer must explicitly provide their labour
- Labour is highly perishable. It cannot be preserved and delivered in the future
- Labourer has weak bargaining power. There is no investment on labour, only applying it or not applying it
- Labour cannot be curtailed quickly, as labourers try to keep jobs for as long as possible.
- Labour increase depends on labour supply. Could be quick or slow to increase labour force
- Labour is not as easily transferred due to differences in language, habits, etc All businesses use labour as a factor of production
Capital
Money or machines and technologies that money can buy. These are your assets.
Entrepreneurship
People who use all the previous factors of production to profit. These days, all entrepreneurship requires information technology.
Information
Debatable 5th factor. Could still be under capital.
Factor Intensity
Certain organizations will use more factors then others.
Labour Intensive
Labour intensive companies view labour as the most important factor. These include:
- Walmart
- Mcdonalds
Land/Resource Intensive
Sells natural resources
- Fishing
- Lumber
- Mining
Capital Intensive
Requires a lot of money to start
- Banking
- Auto manufacturing