Human capital, Investment goods and GDP SS6E3 a & b

4 factors of production are needed to produce goods and services: Natural resources (land) Human resources (labor) Capital resources (buildings and machinery) Entrepreneurship (organization)

Gross Domestic Product GDP of a country is the total value of all the goods and services produced in a country in one year. Indicator as to how rich or poor a country is. Raising the GDP results in a higher standard of living for the people of the country.

Human Capital Investing in the education, training, skills and health of the workers in a business or country. To increase GDP countries must invest in human capital.

Aeropostale If the workers in a country who produce aeropostale clothing are uneducated or untrained, they will be limited in the kind of work they can do. An unskilled workforce limits the types of industry that can develop. If workers are unhealthy, they cannot produce the goods and services that are needed. Businesses and countries that want to be successful must pay attention to investing in human capital. Successful businesses help to increase the GDP of a country to improve the standard of living for all.

Physical Capital Includes the factories, machines, technologies, buildings, and property needed for a business to operate. If a business is to be successful, it cannot let its equipment break down or have its buildings fall apart. New technology can help a business produce more goods at a lower cost.

TransCanada Sock Company The TransCanada Sock Company makes wools socks. They are using the same equipment they have used for thirty years. The company makes good socks, and customers are satisfies with the quality and price. A new company, Great White North Wool Socks, opens. This company has invested in new technology that reduces the cost of wool socks. Customers are satisfied with the quality of the new socks, and they like the lower price. TransCanada Sock Company has a problem. They are losing customers to the new company. They decide to buy newer and better equipment so they can make more socks for a cheaper price. They are investing in physical capital.

DQ 1 How does investment in capital by companies help a country to increase its GDP?

DQ 2 What are some examples of human capital? What are some examples of physical capital?

DQ 3 Why are entrepreneurs so important to the economies around the world? What questions would you ask in an interview with an entrepreneur, if you were trying to start your own business?