Economics AS · Basic economic ideas and resource allocation. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
Factors of production are the resources used to make goods and services. There are four: land (all natural resources), labour (human physical and mental effort), capital (man-made aids to production such as machines and factories) and enterprise. The entrepreneur organises the other three factors and bears the risk of failure. Each factor earns a reward.
Capital in economics means physical equipment, not money, shares or loans. Human capital is different: it is the skill, education and experience of workers.
Division of labour means splitting production into separate tasks, with each worker specialising in one. Output per worker rises, but work can become boring and one stoppage can halt the whole process.
Students treat money, bank loans or shares as capital. As a factor of production, capital means man-made physical goods used in production.
Answer: Output per worker rises by 50%, from 4 to 6 chairs a day.
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