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Factors of Production » Changing the Quantity and Quality of Resources

What you'll learn this session

Study time: 30 minutes

Cambridge spec: 1.2.2

The difference between the quantity and the quality of a factor of production
What can change the quantity and quality of land, labour, capital and enterprise
How to explain a change in a resource using the right cause

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Quantity or quality?

In the last lesson you met the four factors of production: land, labour, capital and enterprise. An economy's supply of each one is not fixed. It can grow, shrink or get better over time. There are two ways a factor can change.

Key terms:

Quantity: how much of a factor there is, for example the number of workers or the number of machines.
Quality: how good the factor is, for example how skilled the workers are or how advanced the machines are.

A country with 5 million workers has a bigger quantity of labour than one with 2 million. But if the 2 million are highly trained, their quality may be higher. Always say which one changed.

Land: natural resources

Land reclamation turns sea into new land, raising the quantity of this factor

🌱 Quantity rises

Discovering new resources: a country finds a new oil field or a new mineral deposit. Land reclamation: turning sea or marsh into usable land by building walls and draining or filling it. Both increase the amount of land.

🏭 Quantity or quality falls

Depletion: resources are used up faster than they are replaced, such as a fish stock that is over-fished. Pollution: poisons soil and water, so they are less useful. Soil erosion: wind and rain strip away fertile topsoil, so farmland grows less.

Key terms:

Depletion: using up a natural resource so that less of it is left.
Land reclamation: creating new land from areas that were sea, marsh or wasteland.
Soil erosion: the loss of fertile topsoil, which lowers the quality of farmland.

Notice that pollution and soil erosion mostly harm the quality of land. Depletion and discovery change the quantity.

Labour: the workforce

Training improves the quality of labour, so each worker can produce more

👥 Quantity of labour

Population size: more people means more potential workers.
Retirement age: if it is raised, people work for more years.
Migration: workers moving into a country add to its labour force. Workers leaving reduce it.
Participation: if more people choose to work, for example more women or older people, the labour force grows.

🎓 Quality of labour

Education: gives workers knowledge and skills.
Training: teaches workers the skills for a particular job.
Healthcare: healthier workers are stronger, miss less work and can do their jobs better.

Key term:

Participation: the share of people of working age who are in work or looking for work.

Capital: man-made resources

🔧 Quantity of capital

Investment: spending on new machines, tools and buildings adds to the stock of capital. Depreciation: machines wear out or become old, so the stock of capital falls unless it is replaced.

💻 Quality of capital

New technology: better machines and software do more, faster. A new robot arm is higher quality capital than the old one it replaces, even if the factory still has one machine.

Key terms:

Investment: spending on capital goods, such as machinery, tools and buildings.
Depreciation: the fall in value and usefulness of capital because of wear and tear or age.

Enterprise: risk takers

💰 Quantity of enterprise

Tax and regulation: low taxes on profit and simple rules for starting a business make it easier and more rewarding to set one up, so more entrepreneurs appear. High taxes and lots of paperwork put people off. Attitudes to risk: in a society where people are willing to risk failure, more businesses are started.

📚 Quality of enterprise

Education: teaching business skills, such as planning and managing money, helps entrepreneurs run better businesses and make better decisions.

A quick summary table

Factor	Changes in quantity	Changes in quality
Land	Discovery, land reclamation, depletion	Pollution, soil erosion
Labour	Population size, retirement age, migration, participation	Education, training, healthcare
Capital	Investment, depreciation	New technology
Enterprise	Tax and regulation, attitudes to risk	Education

Worked example

The made-up country of Altavia raises its retirement age from 60 to 65. The government also opens many new colleges. Identify which change affects the quantity of labour and which affects the quality. Answer: the higher retirement age raises the quantity of labour, because people work for five more years. The new colleges raise the quality of labour, because workers gain more skills.

Common mistakes

Saying that "more workers" is a better quality of labour. More workers is quantity. Quality is about skills and health. Another mistake is forgetting depreciation: a firm that buys 10 machines but loses 12 to wear and tear has less capital than before, not more.

Exam-style question

The country of Norvelle has a growing population. Many young people are leaving school with few skills. A new law makes it easier to start a small business. At the same time, years of heavy farming have caused soil erosion on many farms.

(a) Identify one cause of an increase in the quantity of labour. [1 mark]

(b) Explain one way the government could improve the quality of labour. [2 marks]

Model answer

(a) Population growth (or migration into the country, or a higher retirement age). (1)

(b) The government could provide more training or education (1), which gives workers new skills so they can do their jobs better. (1)

(c) Soil erosion removes fertile topsoil (1), so the land is less able to grow crops, which lowers the quality of the land (1). Farmers produce less from the same area, so the country's resources become less useful. (1)

Exam tip

In "Explain" and "Analyse" answers, name the factor, say whether quantity or quality changes, then give the reason. That chain earns the extra marks.

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