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Factors of Production

Factors of Production

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Factors of Production

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  1. Factors of Production The “Things” … that Make Things

  2. Learning Goals • Students will understand the importance of natural resources and raw materials in the production process • Students will understand the role of labour and capital in production • Students will understand the role of Management in business

  3. Natural Resources • Also known as the “primary industries” • Everything in the world is made up of six types of natural resources… Fuel/Energy Agriculture Logging/Forestry Mining Fishing/Trapping Water • Often converted into the raw materials that make most products • Ex. Mining = Iron Ore = Steel = Car parts, electronics, etc…

  4. Raw Materials • Goods used in the manufacture of other goods • Only with fishing and some agriculture do consumers buy Natural Resources • All other resources are turned into raw materials (Ex. Wheat is a natural resource … that makes flour…which is a raw material for bread) • Converting natural resources to raw material is called processing

  5. Labour • The physical and mental work needed to produce goods • Often an expensive part of production • Costs are reduced with outsourcing • Outsourcing = paying another company to do something for you (ex. GM does not make tires but pays another company to make tires for them) • Note….International trade reduces the cost of outsourcing even further

  6. Capital • The money invested in the business • Can be liquid capital (cash, investments, receivables) which can be easily converted to cash • …or Non-liquid capital (equipment, buildings, etc. )

  7. Information • Information is a product to be sold (ex. Consultants offer advice) • Information is also a tool to be used (ex. Accountant, Lawyer, etc.) • Either way…more information = better production

  8. Management • The people who make decisions on the other factors of production • What capital, information and resources are needed? Where to purchase them from? Etc… • Management oversees all elements of production

  9. Application Section (Step 1) • With a partner select two products you brought with you to class today • DO NOT select products that are too simple (ex. Apple) or too complicated (ex. Cell Phone) • Write these products in the first row beneath Product#1 and Product #2 of your worksheet (next slide) • Brainstorm the six factors of production (as specific as you can) that influenced the making of these two products • Be as complete as you reasonably can

  10. Table

  11. Application Section (Part 2) • With your partner, join another group of two and share ideas • Review/Discuss your product and what you described as the six factors of production for that item • Ask your “new” group members if they know of any factors of production you may have missed • Write these points in the “And???” columns of your worksheet to complete your sheet