Pearson Edexcel · A-Level · Economics B

    Course version: 9EB0 · Version from Sept 2015

    Factors of production: a) Enterprise

    Full specification wording

    Factors of production: a) Enterprise

    Enterprise is the factor of production that organises the other three factors (land, labour, and capital) to produce goods and services.

    Checked against the Pearson Edexcel 9EB0 specification (opens in a new tab) on .

    • Point 1 of 2
    • 4 key terms

    Study notes

    From the checked teaching notes for this specification point.

    The idea

    Enterprise is the factor of production that organises the other three factors (land, labour, and capital) to produce goods and services. It involves the willingness of an entrepreneur to take calculated risks in pursuit of profit. Entrepreneurs identify market gaps, innovate, and make strategic decisions about resource allocation. For example, an entrepreneur starting a tech company combines software developers (labour), servers (capital), and office space (land) to create a new app. The reward for enterprise is profit, which compensates for the risk of failure. Understanding enterprise is crucial for analysing how businesses start, grow, and respond to changing market conditions.

    What earns the marks

    • Define enterprise as the factor of production that organises land, labour, and capital.
    • Identify profit as the financial reward for enterprise.
    • Explain the role of the entrepreneur as a risk-taker and decision-maker.
    • Recognise that enterprise involves innovation and identifying market opportunities.

    Common mistakes and how to put them right

    • Confusing enterprise with capital.

      Put it right: Enterprise is the human skill of organising resources and taking risks, whereas capital refers to man-made physical assets used in production.

    • Assuming all managers are entrepreneurs.

      Put it right: Entrepreneurs take the financial risk of the business, whereas managers are employees (labour) paid a salary to run operations.

    • Believing the reward for enterprise is a wage.

      Put it right: The reward for enterprise is profit, while the reward for labour is wages or salaries.

    Exam tips

    • When defining enterprise, always mention its role in organising the other three factors of production.
    • Link enterprise explicitly to risk-taking and the pursuit of profit in multiple-choice questions.
    • Use the concept of enterprise to explain why some businesses are more innovative or adaptable than others.

    Try the lesson

    The start of the Factors of production: a) Enterprise lesson, made from checked teaching notes for this specification point.

    Have a go first

    Which of the following best describes the role of enterprise as a factor of production?

    Listen

    Enterprise is the factor of production that organises the other three factors (land, labour, and capital) to produce goods and services. It involves the willingness of an entrepreneur to take calculated risks in pursuit of profit. Entrepreneurs identify market gaps, innovate, and make strategic decisions about resource allocation. For example, an entrepreneur starting a tech company combines software developers (labour), servers (capital), and office space (land) to create a new app. The reward for enterprise is profit, which compensates for the risk of failure. Understanding enterprise is crucial for analysing how businesses start, grow, and respond to changing market conditions. A strong answer earns marks for these points. Define enterprise as the factor of production that organises land, labour, and capital. Identify profit as the financial reward for enterprise. Explain the role of the entrepreneur as a risk-taker and decision-maker. Recognise that enterprise involves innovation and identifying market opportunities. A common slip: Confusing enterprise with capital. Instead, Enterprise is the human skill of organising resources and taking risks, whereas capital refers to man-made physical assets used in production. Exam tip: When defining enterprise, always mention its role in organising the other three factors of production.

    See it

    A top-down flowchart starting from a single node labelled Enterprise. Four arrows lead from Enterprise to four nodes: Organises land, labour and capital; Entrepreneur takes calculated risks; Identifies market gaps and innovates; and Makes strategic decisions on resource allocation. The first node, Organises land, labour and capital, points to a node labelled Produces goods and services. The second node, Entrepreneur takes calculated risks, points to a node labelled Reward: profit. The third and fourth nodes, Identifies market gaps and innovates and Makes strategic decisions on resource allocation, both also point to Produces goods and services.
    It shows enterprise as the factor of production that organises land, labour and capital, involves risk-taking, innovation and strategic decisions, and earns profit as its reward.

    Key words

    Say what each word means before you turn the card.

    Enterprise

    Try answering aloud or in your head before turning the card.

    Entrepreneurship

    Try answering aloud or in your head before turning the card.

    Resource allocation

    Try answering aloud or in your head before turning the card.

    Profit

    Try answering aloud or in your head before turning the card.

    See every definition
    Enterprise
    The factor of production that organises land, labour, and capital to produce goods and services.
    Entrepreneurship
    The willingness of an entrepreneur to take calculated risks in pursuit of profit.
    Resource allocation
    The strategic decisions entrepreneurs make about how resources are used.
    Profit
    The reward for enterprise, which compensates for the risk of failure.

    Label the diagram

    Some boxes have lost their names. Pick the right name for each number.

    The diagram again, with 3 boxes numbered instead of named. A top-down flowchart starting from a single node labelled Enterprise. Four arrows lead from Enterprise to four nodes: Organises land, labour and capital; Entrepreneur takes calculated risks; Identifies market gaps and innovates; and Makes strategic decisions on resource allocation. The first node, Organises land, labour and capital, points to a node labelled Produces goods and services. The second node, Entrepreneur takes calculated risks, points to a node labelled Reward: profit. The third and fourth nodes, Identifies market gaps and innovates and Makes strategic decisions on resource allocation, both also point to Produces goods and services.

    • 1Box 1

    • 2Box 2

    • 3Box 3

    0 of 3 labelled

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