Exercises: Factors of production and economic sectors

In Grandma Carmen's bakery, all four factors of production are involved. Classify each element into natural resources, labor, physical capital, or technology and knowledge: (a) the wheat and firewood; (b) the oven and dough mixer; (c) the baker and her assistant; (d) the bakery premises; (e) the sourdough recipe and the pastry-making course taken by the assistant.

Classify these jobs into the primary, secondary, or tertiary sector, and state which one could also fit into the quaternary sector (knowledge and innovation): (a) a sheep shepherd; (b) a welder in a shipyard; (c) a delivery driver; (d) a strawberry farmer; (e) a video game programmer; (f) a carpenter who makes furniture. Explain the criterion you used.

The figure compares the share of each sector in the output of two imaginary countries: Campolia, highly agricultural, and Teknia, a developed country. One piece of data is covered. Remember that the three sectors of each country add up to $100\ \%$.

1. a) Calculate the percentage belonging to the tertiary sector in Teknia, which is the missing data on the chart.
2. b) Reason which country is more developed and explain the relationship between a country's development and the weight of its service sector.

At the school fair, the sandwich stall carries out a test: if a single person handles the entire process (slicing, assembling, wrapping, and charging) it takes $10$ minutes per sandwich; if three people divide the work between them, they produce a sandwich every $3$ minutes.

1. a) Calculate how many sandwiches are produced in one hour each way.
2. b) Explain two advantages of the division of labor and one possible disadvantage (monotony, or that if one person is absent the whole production line stalls).

In Marco's grandmother's village, out of every $100$ employed residents, in $1975$ there were $55$ working in agriculture, $25$ in manufacturing, and $20$ in services. Today, there are $8$ in agriculture, $22$ in manufacturing, and $70$ in services.

1. a) Calculate the percentages for each era and summarise which sector has collapsed and which has grown.
2. b) Give two reasons explaining this change (machines do the work of many people in agriculture; as earnings increase, people spend more on services).

The bakery invests $\$24\,000$ in a new dough mixer and $\$6\,000$ in a pastry-making course for the assistant.

1. a) State which of the two investments is physical capital and which is human capital, and explain the difference.
2. b) Reason how each improves the bakery's production and why human capital is said to "travel inside the person": what happens to that investment if the assistant leaves for another bakery?

An agricultural cooperative sells tomatoes at 0.35 pesos/kg to a local cannery. To produce each jar of preserves, the factory uses 1.5 kg of tomatoes and other supplies valued at 0.25 pesos (jar, oil, energy), selling the finished product to a wholesaler for 1.40 pesos. Next, a supermarket purchases the batch and sets the retail price at 2.10 pesos per jar. Finally, a digital home delivery platform charges a flat fee of 1.90 pesos to deliver the purchase to the consumer's home.

1. a) Calculate the value added generated by each of the four links in the chain and identify which sector of economic activity each agent belongs to.
2. b) Assume that an extreme drought makes the cost of tomatoes in the field 60 % more expensive. Predict how this cost increase will be transmitted along the chain: which participants have a greater capacity to pass on the price increase to the final price, and who will bear a greater loss of margin? Justify your answer.
3. c) Design a viable strategy for the agricultural cooperative to increase its share of value added without depending exclusively on the industrial cannery.

In a parliamentary debate on regional budgets, a representative states: "The primary sector barely generates 2.4 % of GDP and only employs 3.9 % of the workers in our country; maintaining incentives for this sector is an anachronism belonging to the past, and we should devote all resources to services and technology".

1. a) Rebut the representative's statement by analysing the discrepancy between the direct accounting weight of a sector and its strategic nature for an economy (food sovereignty, territorial balance, and global supply chains).
2. b) Resolve the apparent paradox: how is it possible that a sector employing fewer than 4 out of every 100 workers can produce enough food to supply the population and even export surpluses? Relate your explanation to productivity and capital intensity.
3. c) Predict two economic effects and two environmental effects that the country would suffer in the medium term if it decided to dismantle its agricultural sector to depend 100 % on foreign imports.

The food truck "La Crepería Rodante" has a 400 pesos budget and experiences order backlogs during peak hours. Its only cook takes 6 minutes to complete each order: 4 minutes of passive cooking on its only crêpe maker and 2 minutes of active preparation (dispensing batter, filling, and taking payment). Management is hesitating between two alternative and mutually exclusive investments of 400 pesos each:

• Option A: Buy a second identical crêpe maker to be able to cook two crêpes simultaneously while preparing the rest.

• Option B: Send the cook to a high-performance culinary course that would reduce their active handling time by half (1 minute), without changing the cooking times of the machine.

1. a) Identify which specific factor of production is increased with each option (physical capital versus human capital) and explain the economic difference between the two.
2. b) Demonstrate through production capacity calculations (crêpes made per hour) which of the two options best resolves the business's current bottleneck.
3. c) If the company's plan were to hire an assistant next month to attend to the counter, which of the two initial investments would become more profitable? Justify your recommendation.