1.3 Factors of production

• Land


  Natural resources such as rivers, forests, etc

  Occupationally mobile but geographically immobile

  Reward: Rent
• Labor


  Human resources/mental talent/physical talent used in production

  Geographically and occupationally mobile

  Reward: Wages/salaries
• Capital


  Human made resources which are used in the production of other goods and services

  Reward: Interest
• Enterprise


  Brings all and organizes the factors of production together, takes risks

  Reward: Profit
• Division of labor


  Production is broken down into different tasks and each labor contributes to performing a particular task
• Advantages of division of labor

  • Workers are more skilled and effective -> higher productivity -> increase quality of products
  • Repetition -> higher productivity -> more production -> lower price of goods and services
  • Time saved from moving operation between workers
• Disadvantages of division of labor

  • Repetition -> dissatisfaction, bored -> lower productivity
  • High dependency on the entire labor force -> breakdowns halt the whole production process
  • High unemployment in future due to structural unemployment, workers might be replaced by machines