FACTORS OF PRODUCTION CONTD
Hello Everyone, Happy Friday. Thank
God It's FRIDAY!!!!!.... LOLZ, Yes the last working day of the week and then
rest rest rest!!!... There's time for HARD WORK and also time for REST... Pls
Make Sure you Balance the Two Very Essential. Straight to the Point of the Day
CAPITAL CONSUMPTION refers to the using up of existing capital stock and
not replacing worn-out capital goods used in production. When fixed assets like
Buildings, Machinery or Motor Vehicle are used continuously, they undergo wear
and tear, hence such assets depreciate in value. It is this wear and tear of
these capital goods which reduces their value which is referred to in Economics
as CONSUMPTION or DEPRECIATION.
During the period of Capital
Consumption, enough savings are not made to maintain and replace depreciating
capital goods or assets. If a Country finds it difficult to maintain its stock
of capital, either by making provision for depreciation or her inability to
replace worn-out capital or asset, such a country is said to be living on
capital or consuming capital and this affects the standard of living of the
people negatively.
ENTREPRENEUR
An Entrepreneur can be defined as
the factor of production that co-ordinates and organises other factors of
production( Land, Labour and Capital) in order to produce goods and services.
The
Entrepreneur bears the risks and takes major decisions of the business. He
risks his capital in setting up the business with the aim of obtaining maximum
profit.
CHARACTERISTICS OF ENTREPRENEUR:
v Risk
Bearer: He risks his capital in the course of investment and
whatever comes out of it, whether good or bad, he has to take.
v Organisation: He
organises productive resources for the production of goods and services.
v Decision
Making: He takes decisions in the course of production, which can
bring out better results.
v Controls
other Factors: He has absolute control over other factors of production
e.g. their combinations in order to get maximum production at minimum cost.
IMPORTANCE OF ENTREPRENEUR:
Ø Decision
Making: The Entrepreneur takes decisions during the production
process. Good decisions taken on what to produce, quantity and quality to
produce etc; will bring out good results.
Ø Provision
of Capital: The Entrepreneur is responsible for the provision of capital
for the business. His capital may include Physical Cash, Motor Vehicle, Plants
& Machinery etc.
Ø Efficient
Management: He ensures this by combining the other factors of production
in order to maximise production and profits.
Ø Efficient
Organisation: He also ensures that qualified personnel are hired and that
they are assigned their duties and they are adequately supervised to ensure
strict compliance with instruction.
PRODUCTION POSSIBILITY CURVE (PPC)
The Production Possibility Curve (PPC)
also known as the PRODUCTION POSSIBILITY BOUNDARY (PPB), refers to a graph or a
curve showing the possible combinations of different commodities that can be
produced in a given economy, given the prevailing level of technology, if all
the available productive resources are efficiently utilised. In other words,
PPC is a graphical illustration of all the possible combinations of two or more
types of commodities which a society can produce, using a given quantity of
resources.
In order to produce a particular
commodity, the production of another commodity has to be sacrificed. The PPC
has a downward slope from left to right indicating that, there is an
opportunity cost of producing more of one type of commodity. The cost is,
however, measured in terms of quantity forgone of the other types of
commodities.
Below is a PPC table showing the production of cattle
and motor vehicles in Nigeria
|
Possible Combination
|
Heads of Cattle
|
No. of Motor Vehicles
|
|
A
B
C
D
E
F
|
200
170
100
80
40
0
|
0
30
70
130
150
180
|
EXPLANATION:
The alternative open to Nigeria to
substitute the production of cattle for vehicle on a monthly basis, assuming a
given state of technology and a given total or quantity of resources. There
exist extreme cases of A and F, where respectively, no vehicle is produced at
all in order to produce a maximum of 200 cattle, and no cattle were produced at
all in order to produce a maximum of 180 motor vehicles. If more resources for
the production of cattle have to be given up or forgone. For example, in order
to produce 130 motor vehicles rather than 70
that is, more from C to D (100-80)= 20heads of cattle have to be given
up. In other words, the opportunity cost of producing 130 motor vehicles is the
20 units of resources for the production of cattle that have to be given up or
transferred.
NOTE: PARTS OF THIS POST WERE CULLED FROM TONAD ESSENTIAL ECONOMICS FOR
SENIOR SECONDARY SCHOOLS BY C.E ANDE. WE AT EDU-MADE-EASY RESPECT THIS CRAFT TOO
MUCH TO DENY ITS ORIGIN. THANK YOU
Hope this was very helpful to you, leave a comment of what you think of
this tutorial and your questions below. Have a Blessed Day and Remember You are
Amazing. God Bless
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