FACTORS OF PRODUCTION 4 Types of Resources

inputs or.________________ Factors of Production (FOP’s) are also called resources or scarce resources or inputs or.________________ Or ______or______ 2

What Are Resources? The assets (things of value) to supply and produce goods and services to meet the needs and wants of ___________

INPUTS & OUTPUTS Before products (_______/_______) can be consumed , they must be produced. Factors of production constitute the input While the goods & services produced constitute the outputs

Factors of Production Resources that can be used to produce goods and services . Land (natural resources) Labor (human resources) Capital Entrepreneurship

Factors of Production

Production -the process of transforming naturally occurring materials (*that provide little satisfaction in their natural state) to products *that provide more satisfaction. Wants and Needs Satisfying Process 7

Land provides the basic raw materials that become the goods. Labor does the hands-on work. Capital is the tools that makes the job easier. & Entrepreneurship organizes the entire process. 8 8

Interdependent LAND + LABOR CAPITAL ENTREPRENEURSHIP = PRODUCTS ( GOODS/SVCS ) Interdependent

Land is the naturally occurring materials of the planet *that are used for the production of goods & services including the land itself SOIL- where crops can grow- Nutrients in the ground to produce vegetables, Livestock to provide meat Flora _____ Fauna _____ The air we breathe LUMBER, STEEL Minerals/Metal-- such as copper, lead, iron , gold, coal etc. 10

“Gifts of Nature”- all things found in nature. W/O land, there is no production. RENEWABLE & NON-RENEWABLE

Land is the passive FOP WHY? A land simply exists Q

* Land- this just doesn't refer to the surface-land of the business but also includes lal ohert uraalnt seurcoers keil teawr, ilo, sag.

2) LABOR (Human Resource)

*Labor *Labor is the mental and physical efforts of humans (excluding entrepreneurial organization) used for the production of goods and services. *Labor includes both the physical effort of factory workers and farmhands often associated with labor, as well as the mental effort of executives and supervisors. 15

LABOR Work time and work effort Human Resource- any human effort exerted during production (except ENTREPRENEURSHIP) 1) # OF HOURS WORKED 2) SKILLS The work that people do Work time and work effort Can be physical(______collar) or intellectual(_______collar) Quality of labor increases w/ motivation, training & education

Q #2 One way to improve human resources is to a. provide recycled paper. b. fill everyone's needs and wants. c. educate ,train & _______ people.

* As such, land simply exists. PASSIVE To make the gifts of nature satisfy our needs and desires, human beings must do something with the natural resources; they must exert themselves, and this human exertion in production is called labor. Q LABOR IS ____?____

Labor is the rwko cefro of the business

Capital Capital is the manufactured goods used in the production of other goods, This factor must be produced using other factors of production, *which means that society is often faced with the choice between producing consumption goods that satisfy wants and needs and capital goods that are used for future production. SEE PPC 20

* While a crew of construction workers might be able to fabricate a four-bedroom house with nothing but bare hands, an assortment of hammers, saws, and other tools is bound to make their work easier and more productive. SO- -Without capital, labor would do ALL production "by hand." The key role of capital in the production process is to make labor more productive.

CH 1 SEC 3 Real capital is the purchase of tools, machines and factories. When entrepreneurs purchase REAL CAPITAL, they are adding to what is known as CAPITAL to their company. ************************************************** *This makes it possible for that company to now push its production possibilities curve outward (to the right). This is known as economic growth. (Coming Soon) The economy can now have more consumer goods and more capital goods.

CAPITAL -materials used to create goods or services CAPITAL GOODS- buildings, machinery, equipment and tools used in the production process MONEY- used to buy Capital Goods or finance a new business

EX’s CAPITAL VS CONSUMER *Capital goods are used in making finished products that people buy. -These finished products – the goods and services that people buy, are called consumer goods. EX’s CAPITAL VS CONSUMER

*Passive-Active

ID THE FOP Delivery Truck Teacher Factory Tree ATM machine Bushel of corn River Hair stylist Gold Barrel of oil Doctor Sandwich Bulldozer Tractor Farmer Factory worker Your car stereo

4) ENTREPRENEURSHIP

Entrepreneurship Entrepreneurship is the special sort of human effort that takes on the risk Entrepreneurship is the FOP that organizes the other three. * Without someone to organize production, the other 3 FOP’s do NOT produce. A key component of entrepreneurship is risk. * This resource takes the risk of organizing production BEFORE anything is produced and with no guarantee that production will be successful. 30

ENTREPRENEURSHIP ABILITY & RISK TAKING INVOLVED IN STARTING 1) A NEW BUSINESS &/OR 2) A NEW PRODUCT

*

Thomas Edison 1847 – 1931 Only attended formal school for a few months Taught by his mother At 13 sold newspapers and candy on a local train line Obtained 1093 patents during his life

Thomas Edison 1847 – 1931 His first successful invention was to improve the stock ticker First great invention was the tin foil phonograph which recorded sound First demonstrated the electric light in 1879 Invented the kinetoscope or motion picture camera

* Free Enterprise is based on the trrreeeennup that develops a business idea and then uses the other factors of production to carry out the activity

* Economists have used the four general categories of labor, capital, land, and entrepreneurship since the days of Adam Smith. * These categories made a lot of sense with the onset of the industrial revolution in the 1700s, because factors of production (and especially owners of the factors of production) were largely segmented groups. That was then, this is now. The lines between these four resource categories are frequently blurred in the modern complex economy. 36

Farmland provides an example of the blur between land and capital. Q #5 - Is farmland Land or Capital? EXPLAIN 37

Technology- the 5th FOP ? Use of science or technical knowledge to create or improve business

3. publishing executive 4. salesperson 5. editor 6. petroleum Consider the four factors of production that were needed to make your ECON book. ID the FOP. 1. trees 2. computers 3. publishing executive 4. salesperson 5. editor 6. petroleum 7. oil used for fertilizer 8. book presses 9. word processing specialist 10. typesetter 11. storage shelves 12. publisher’s building site