Factors of production

One morning you wake up with a great idea. You’ve thought of a product that no one else has and you are certain there's demand for it. But how will you turn your idea into reality? First of all you will need raw materials to manufacture from, probably oil and metal, but also paper for packaging. You can't produce it by yourself, so you'll need people to help you make it, package it and market it. Finally, your staff will need a factory and machines to produce with. In short, you need the factors of production: land, labour and capital.

The factors of production are the starting point for all economies. No economy can exist without them. The most basic of the factors is land. When economists talk about land, however, they don’t just mean space to build on or fields to grow crops. Land means everything that nature provides and we can use for production. The land factor includes raw materials like coal, metals, oil and timber. It also includes things like water, fish and salt. So, although it seems illogical, land also means the sea!

The second factor is labour. Raw materials will just stay in the ground unless people dig them out and do something with them. Similarly, factory machines will sit doing nothing without people to operate them. Labour can mean the physical effort such as lifting, digging and building. This is called manual work. Labour also includes mental work like thinking, writing, communicating and designing. Industries that need many workers working long hours are called labour intensive industries. However, the quality of labour is as important as the quantity. An educated, skilled and fit workforce is more productive than and uneducated, unskilled and unhealthy one. This characteristic of the labour factor is called human capital. Some countries have large labour forces, but are poor in human capital because the economy lacks education and health care.

The third factor is capital. Capital includes buildings such as factories for production and warehouses for storage. It also includes the tools and equipment that workers use in the manufacturing process. In heavy industries such as shipbuilding or steel making, capital usually involves big machinery and mechanical equipment. In high-tech industries, on the other hand, capital generally means computers and complex laboratory apparatus. These days, industry tends to be more capital intensive than labour intensive.

When companies make investments, they buy new capital. There are two types of investment that companies need to make. The first is to buy new equipment so that they can expand their production. This is called net investment. Net investment is essential for economic growth. However, equipment gets old and needs repairing or replacing. The money spent on this kind of maintenance is called replacement investment.

Land, labour and capital are the three factors of production identified by Adam Smith and the classical economists. However, more recent economists have identified one more factor: entrepreneurship. This means people like you, with great business ideas that set the economy in motion.

B Comprehension

Now read the text again and decide whether these statements are true or false.

1. Raw materials are the most important factor of production. T_F_

2. The land factor includes all the raw materials that come form the land and the sea. T_F_

3. The most important thing about the labour factor is the size of the labour force. T_F_

4. In modern economies, more labour is used than capital. T_F_

5. Net investment allows companies to increase their production T_F_

6. Entrepreneurs are part of the labour factor. T_F_

Before you listen

Discuss the following with your partner.

-Entrepreneurship is the fourth factor of production. Which things in the list below do you think entrepreneurs bring to the economy?

C Listening

1. managing people

2. motivating people

3. finding solutions to problems

4. communicating with customers

5. inventing new products

6. finding new markets

7. making profits

8. organizing things

9. taking risks

Now listen and tick the things which are mentioned.

Grammar: Passive voice

We use the passive voice to say what happens to the subject.

The Present Simple to be (am, is are) + Past Participle

Houses are always built in our country.

I am asked at the lessons.

He is often invited to the parties.

The Past Simple to be (was, were) = Past Participle

The castle was built in the 17^th century.

The pupil was sent to the conference.

The Future Simple will/shall be + Past Participle

We shall be informed about the meeting tomorrow.

He will be laughed at in this situation.

Complete the sentences using one of these verbs in the correct form: cause damage hold include invite mate overtake show translate write

1. Many accidents ...are caused by dangerous driving.

2. Cheese...................................................from milk.

3. The roof of the building...................................................in a storm a few days ago.

4. There's no need to leave a tip. Service...................................................in the bill.

5. You...................................................to the wedding. Why didn't you go?

6. A cinema is a place where films...................................................

7. In the United States, elections for President..................................every four years.

8. Originally the book.............in Spanish and a few years ago it,...............into English.

9. We were driving along quite fast but we....................................by lots of other cars.

Write questions using the passive. Some are present and some are, past.

1. Ask about the telephone, (when/invent?) ...When was the telephone invented?.,.

2. Ask about glass, (how/make?) How...................................................................

3. Ask about Australia, (when/discover?)....................................................................

4. Ask about silver, (what/use for?) ...........................................................

5. Ask about television, (when/invent?)..................................................................

Put the verb into the correct form, present simple or past simple, active or passive.

1. It's a big factory. Five hundred people ...are employed... (employ) there.

2. Water...................................................(cover) most of the Earth's surface.

3. Most of the Earth's surface...................................................(cover) by water.

4. The park gates...................................................(lock) at 6.30 p.m. every evening.

5. The letter...................(post) a week ago and it......................(arrive) yesterday.

6. The boat.............. (sink) quickly but fortunately everybody..........................(rescue).

7. Ron's parents....................(die) when he was very young. He and his sister .............................. (bring) up by their grandparents.

8. I was born in London but I......................(grow) up in the north of England.

9. While I was on holiday, my camera.............................(steal) from my hotel room.

10. While I was on holiday, my camera.....................(disappear) from my hotel room.

11. Why.................................................. (Sue/resign) from her job? Didn't she enjoy it?

12. Why.......................................(Bill/sack) from his job? What did he do wrong?

13. The company is not independent. It....................(own), by a much larger company.

14. I saw an accident last night. Somebody...............(call) an ambulance but nobody...........................(injure) so the ambulance.......(not/need).

15. Where................ (these photographs/take)? In London?................(you/take) them?

Rewrite these sentences. Instead of using 'somebody/they/people' etc. write a passive sentence.

1. Somebody cleans the room every day. ...The room is cleaned every day...

2. They cancelled all flights because of fog. All.......................................................

3. People don't use this road very often.......................................................................

4. Somebody accused me of stealing money. I..................................................

5. How do people learn languages? How............................................................

6. People advised us not to go out alone. ...............................................................