Factors of Production
Raw Materials
Definition: Any goods that are used to make other goods eg. wheat used to make bread
There are 2 types of raw materials
Ingredients: are raw materials that go into a product eg. sugar cane that is used to make refined sugar
Supplies: are raw materials that although do not become a part of the product, they are used in running the business of a product eg. oil used to power machinery that processes wheat
Capital
Definition: the money invested into a business
The capital can be Liquid or Non-Liquid
Liquid capital means that it is easier to purchase things or to exchange for money
Includes cash, stocks, bonds and accounts recieveable
Non-Liquid capital means that it is harder to exchange things into money
Includes capital goods like buildings and equipment, or intellectual property like skill, ideas or talent .
Bakery equipment is harder to exchange
into liquid cash
Subtopic
Management
Definition: From allocating companies resources to making decisions on whom to hire, what to make, and where to sell, managers control the factors of production
Higher-level managers decides how a business's profit will be distributed along with the other duties
2 types of Managers
Single Proprietor
Head
Information
Definition: Information such as public opinions, competition, political conditions, trends and sources of supply are looked at before producing goods and services
Access to information minimizes risk enhancing profitability
A business is able to sell the information found if they wanted to acquire it
Businesses are able to provide data for free online and charge companies to advertise on their site
Examples of financial groups
Investigators are needed to research
on latest trends etc.
Researchers are needed to investigate and find information
Natural Resources
Definiton: Natural resources are resources that occur in the environment without actions of mankind
All natural resources come from 6 types of primary industries
Agriculture
Fishing and trapping
Mining
Water
Fuel and energy
Logging and forestry
Labour
Definition: All physical and mental work needed to produce the goods or services
Expensive cost of doing business- many are looking for alternative methods to save money on labor costs
Most manufacturing tasks are now done by machines
to save money and time
Very apparent to automobiles industries
Consolidation is also a way to save money by closing small manufacturing sites and work in one huge area instead
Outsource is another way to save labour costs
by hiring other companies to do the work
Results in cheaper labour cost in countries
India,mexico or china.
Most companies will outsource
financial services