Intro to Business Lesson 2.2.3

Lesson 2.2.3- Factors of Production

Intro to Business
Unit 2: Internal Business
Topic 2: Handling Your Business

Vocabulary:

Human capital-the knowledge required to operate equipment and machinery
Labor-includes the individuals processing the raw materials into final goods
Land-includes the land itself and anything on or under it, like timber, oil, gas, or other natural resources
Physical capital-tangible equipment
Production-the process of converting raw materials or inputs into something that is more usable and has a higher value

Open Ended

What does the term production mean?

​What is Production?

• The process of converting raw materials or inputs into something that is more usable and has a higher value, an output

• Products creates products which humans want and are willing to pay for

• The production process includes: land, capital, labor and entrepreneurship

Production vs. Operations

• Production is the process of turning raw materials into finished products.

• Production activities- planning, quality control, ensuring efficient processes to meet customer needs

• Operations is the management of all business activities in creating and delivering products and services

• Operations activities-oversee the entire process, including production, project management, quality assurance, and inventory management as well as broad factors like market trends, customer demands, and financial planning

• Production is usually a subset of operations

​Production	​Operation
​Grinding wheat into flour	​Managing the purchasing and maintenance of equipment
​Using raw materials to produce wheat flour	​Purchasing wheat and any other necessary raw materials and managing suppliers
​Finishing the process of producing flour including packaging	​Managing customers and sales orders, including delivery
​Operating machinery to produce flour	​Hiring and training employees to operate machines, and arranging for the packaging of the wheat flour

Categorize

Options (6)

converting raw material into a finished product

operating machinery

packaging

purchasing equipment

hiring production employees

managing sales

Categorize the following as pertaining to operations or specifically to production.

Production

Operations

Factors of Production

• Includes the land itself and anything on or under it, like timber, oil, gas, or other natural resources

• Includes land on which office or factory buildings are located or land held for later development

Land

• Includes the individuals processing raw materials into final goods

• Includes workers in factories, construction sites, mines, and professionals providing specialized services

Labor

• ​Includes buildings, machinery, and equipment that workers use to produce goods and services

• These vary depending on the nature of the business

Capital

• An individual who brings together all other factors of production

• A risk taker who invests money in a business with the expectation of a return

Entrepreneurship

Multiple Choice

What factor of production is represented by the warehouse and forklifts in a storage company?

• land

• entrepreneurship

• capital

• labor

Match

Craig is going to start a business making customized pens. He can design pens of different sizes and shapes, from unique materials, and with or without custom text.

Craig has purchased a lathe and drill press for the process and a small building on a lot in a business district.

He also hired two college students and trained them to operate the lathe and drill press.

Identify the factors of production in Craig's business.

• Craig

• the lot he purchased

• college students

• lathe

entrepreneur

land

labor

capital

• entrepreneur

• land

• labor

• capital

• The knowledge required to operate equipment and machinery

• The knowledge, qualifications, and experience of employees

• Intangible-cannot touch it, but can be seen in knowledge and ability

Human Capital

• Tangible assets that aid in production including equipment, buildings, machinery, and raw materials

• Tangible- can be touched or held in your hand

​Physical Capital

Types of Capital

Categorize

Options (8)

intangible

tangible

knowledge

experience

equipment

raw materials

man-made

skill

Categorize the following as pertaining to human capital or physical capital.

Physical Capital

Human Capital

Open Ended

The factors of production that were required in this business were land where the factory could be established, a wheat mill, raw material (wheat), labor to operate the mill, and an entrepreneur to bring all other factors of production together. In a situation where no skilled labor is available, what will happen?

What's Next?

Next Class: Monday, 3/9/26

Lesson 2.2.4- Production and Supply Chain

Poll

How well did you understand today's lesson?