2.3

Question 1

Explain land as a factor of production [3]

Answer 1

• Means the space where production can be located
• Also refers to the natural resources that are inputs into the production process
• This could include wind, water, solar and oil

Question 2

Explain labour as a factor of production [3]

Answer 2

• Means human effort contributing to production wages and salary earned in return
• Many businesses see workers as their biggest cost
• Managers and employees are usually grouped together

Question 3

Explain capital as a factor of production [3]

Answer 3

• Includes premises and equipment that are repeatedly used in production
• For example, a chef’s pots and pans are capital, ingredients are raw materials
• Building bigger stocks of capital increases income and wealth