How are the factors mixed?

Business people have to decide how they are going to use the various inputs, or factors. One of the biggest decisions is whether production should be mainly carried out by people - called labour intensive production; or mainly carried out by machines - called capital intensive production.

A number of factors affect the decision:

• The business may be very small and it may not be worth its while buying a lot of capital equipment.
• The business may be producing specialist products, for which machinery is no use. An artist could not use machinery to paint portraits.
• Sometimes labour will be cheaper than machines, sometimes the other way around.

Why not now try the worksheet on Cameron Balloons’ production methods? This could help you with your portfolio work.