A: Cost of losing a job? B: Cost of starting a business? C: Cost of employing staff? D: Cost of something given up?
measures the cost of any economic choice in terms of the next best alternative foregone EXAMPLES: The opportunity cost of deciding not to work is the lost wages foregone The opportunity cost of spending money on a foreign holiday is the lost opportunity to buy a new television.
Poor Management Insufficient Capital Lack of Planning Operational Inefficiencies
1. ( ): describes the actions of someone who shows some initiative by taking a risk by setting up, investing in and running a business. 2. ( ) - something you have to have
To produce goods and services requires resources. We call these the factor inputs available in the production process. Economists make a distinction between three types of resources - land, labour and capital. LAND LABOUR CAPITAL
Factors of production are the resources of LAND, LABOUR, CAPITAL and ENTERPRISE used to produce goods and services.
Land is the natural resources on the planet. It includes space on the ground, hills, seas, oceans, air etc
Labour is the human input (workers, managers etc) into the production process. Each individual has a different level of skills, qualities and qualifications. This is known as the HUMAN CAPITAL.
Man made physical goods used to produce other goods and services. Examples include machines, computers, tools, factories, roads etc. Increases in the level of capital are called INVESTMENT
The entrepreneur provides the initial ideas. They risk their own resources in business ventures. They also organise the other 3 factors of production.
Labour: Workers employed directly in the car industry; engineers, designers, paint sprayers, testers, management staff, transport & distribution workers etc Land: Natural resources used in manufacturer, land for plant and equipment Capital: Fixed capital: machinery, technology, buildings + Working capital: i.e. stocks of raw materials and components Entrepreneurship (sometimes seen as a separate factor): management, risk-taker
The factors of production are combined to make goods and services. Choices have to be made over what to produce and how to produce. The value of total production in an economy is known as TOTAL OUTPUT.
(1) PRIMARY INDUSTRY (2) SECONDARY INDUSTRY (3) TERTIARY INDUSTRY
(1) PRIMARY INDUSTRY Industry that extracts raw materials from the earth, such as coal, fish and wheat. Raw materials are mined, collected, grown or cut down. Examples coal mining, agriculture, oil extraction
(2) SECONDARY INDUSTRY Industry that processes primary products into manufactured goods. Examples car production, making tables
(3) TERTIARY INDUSTRY Businesses that provide a service, either to individuals or to other businesses Examples hairdressing, banking or solicitors
A]] Think about IGS. What evidence is there of the 4 factors of production land, labour, capital and enterprise? B]] Now do the same for a business that you know something about. C]] What qualities are needed in an effective entrepreneur? D]] Think about your own human capital. What skills and qualities do you have?