MGTA01 – Lecture 2 Thursday, 16 January
Today’s lecture (pages 7 – 12 from textbook)
Factors of Productions:
The basic/fundamental building blocks used to produce anything are called factors of
production. There are 4 factors of production of a business are:
1) Natural Resources – raw material found in the ground, grown from the earth, or
harvested from nature. For example: coal, wheat water, wood, oil. Four of the five most
profitable businesses in the world rely on natural resources (oil, carbon, gas)
2) Labour – people to do your work for you; employees
3) Capital – money, or the machines and technologies that money can buy. For example,
phones, hammer, tractors, software, etc. Most businesses require some amount of
money to start and some kind of technology.
4) In much of the 20 century people believed that governments were responsible for
organizing and running businesses, they were nationalized and state-owned. In the 70s
and 80s, people realized that government wasn’t doing a pretty good job. So since the
1970s one more factor of production was added:
Entrepreneurship: Society needs people who want to assemble and organize the other
factors as without motivation and ambition, no businesses would exist.
You don’t need to have all of them to run a business except entrepreneurship.
Who controls the factors of production?
Different countries have had different approaches about who should own the factors of
production. Should the government be in control or the individuals be in control?
Government in control - Communist or socialist countries
Market Economy: Capitalist countries – countries where the government does not play a part in
nay businesses and everything is done by and in control of the people. There are no purely
capitalist economies in the world right now.
- Mixed market economies: most of the decisions and factors and industries are made
by the people. For example, countries like Canada, USA, UK, France, China, India.