Factors of Production

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In Economics, there are four main Factors of Production: Land, Labour, Capital and Enterprise.

Each of these factors has it's own demand curve, supply curve and price (e.g. a wage for labour)

Contents 1 Marginal Revenue Productivity 2 Land 2.1 House land differs to other Factors of Production 2.2 Increase in price of land 2.3 Importance of opportunity cost 2.4 Location of firms and industries 3 Labour 4 Capital 5 Enterprise

[edit] Marginal Revenue Productivity

Marginal Revenue Productivity is the extra revenue earned when an additional unit of factor of production is employed. For example, if a busy bar hires an extra bartender who can serve €1000 worth of drink in a night, then the MRP of that unit (bartender) is €1000 per night.

MRP is also subject to the Law of Diminishing Returns. In our example above, if more and more bartenders are hired, eventually behind the bar will become crowded, the bartenders won't be able to get to the taps, and the extra revenue that each new bartender (unit) can earn will begin to fall.

[edit] Land

[edit] House land differs to other Factors of Production

1. Fixed supply
2. No initial cost to society

Rent is price determined, not price determining.

[edit] Increase in price of land

1. Increase in population
2. Land for industry
3. Transport
4. Agriculture
5. Leisure
6. Tourism

[edit] Importance of opportunity cost

1. Wages
2. Social costs and benefits
3. Economic realism
4. Consumer behaviour

[edit] Location of firms and industries

Location factors to be considered:

1. Land
2. Labour
3. Capital and Infrastructure
4. Back up services
5. Government regulations
6. Markets

[edit] Labour

[edit] Capital

[edit] Enterprise