Short Answers

1. Briefly explain the factors of production and give an example of each.

--Answer below:

The resources used in production are called factors of production. The four factors of production are land, labor, capital (physical capital and human capital) and entrepreneurship.

Land is the general term to describe those nonhuman made resources provide by nature. It is also called the natural resource. For Example: land, water, wood and mineral deposits.

Labor means human resource, which includes every individual who works and contributes to the production. For instances, CEOs, factory workers, farmers, etc.

Capital can be divided into two parts--physical capital and human capital. Physical capital includes all manufactured resources, for example, buildings, equipment, machines, etc.

However, how much the nation produces depends not only on physical capital but also Human capital. Human capital is to define the accumulated training and education of workers. More educated workers can improve the efficiency of production. As the result, the overall GDP will increase. (Examples: educated teachers, experienced engineers)

Entrepreneurship can be defined as the entrepreneur or proprietor who combine the above 3 resources and dealing with the decisions making, then getting "profit" for the risks they made. Examples: senior managers and CEOs.

2. This news clip illustrates the concept of supply and demand. Discuss the impacts that higher oil prices will have on the automotive industry. Include both demand and supply side effects.

--Answer below:

The rise in the oil prices plays a major role in automotive industry. Oil is used mainly for making the gasoline. From the aspect of demand, people who cannot afford or not willing to pay for high price gasoline will cause the demand of gasoline to decrease. In other hand, gasoline and vehicles are complements. Therefore, the demands for vehicles will also decrease. Due to the higher price for gasoline, people start to look for fuel-efficient vehicles. In this case, the demand for fuel-efficient vehicles will become relatively high when it compare to original vehicles. It is worth to mention that people may choose to buy Japanese cars rather than American cars, because Japanese cars are comparatively efficiency. As the demand for Japanese vehicles increase, the recession in the US automotive industry can be easily predict.

In general, supply in automotive industry will decrease due to the increase of oil price. Oil is necessary for tires production, as the result of oil price increase; the cost of producing tires will increase. The cost of products will directly affect the quantity supply. The price change also affecting the type of vehicles supplied