The Production of Goods and Services

The production process Produces goods and services to satisfy our needs Goods are tangible items eg cars, houses, books, computers Services are intangible acts that result in a benefit eg hairdressing, teaching, waitressing

Factors of production A resource used in the production process (ie a resource)

Resources and standard of living We have already examined how the economic problem impacts individuals differently, based on the availability of resources The availability of resources also impacts the degree to which an economy is able to satisfy its wants Our ability to satisfy our needs and wants determines our standard of living

Availability of resources Abundance of high quality resources > higher standard of living Shortage of poor quality resources > lower standard of living

Four types of resources Natural resources Labour Capital enterprise

Natural resources (land) All resources provided by nature used in the production process Return for land is rent Rent is paid to the owners of land

Labour Mental or physical effort that is used in the production process Return for labour is wages Wages are paid to the owners of labour

Capital Resources that are not natural that are used in the production process eg machinery, computers, software, buildings Return for capital is interest Interest is paid to the owners of capital

Enterprise Management of the factors of production throughout the production process Return for enterprise if profit Profit is paid to the owners of enterprise