1. PRODUCTION
7.01: Describe the basic factors of production such as land, labor, capital, and entrepreneurial skills and their impact on economic activities. 1

2. Economics The science of decision making.
Social science that studies the choices of producers and consumers as they try to satisfy unlimited wants and needs with limited resources
Economies produce goods and services to satisfy the people’s wants and needs. 2

3. NEEDS vs. WANTS
Necessities
Things people desire but do not need 3

4. Economics
The study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources.
Economies produce goods and services to satisfy the people’s wants and needs.

5. Basic Economic Questions
What should we produce?
How should we produce it?
For whom should we produce it? 5

6. Four Factors of Production
LAND
Gifts of Nature
Property and natural resources
Renewable resources
Can be replaced
Nonrenewable resources
Cannot be replaced 6

7. Four Factors of Production
LABOR
Work
Human Capital
A person’s potential for economic productivity
Developed by natural talents, education, training, & good habits.
Blue Collar and White Collar 7

8. Four Factors of Production
CAPITAL
Financial capital
Money invested in a business to make it grow
Basic assets used in production
Capital goods (Physical capital)-products used to produce the final product
machinery, tools, buildings, raw materials, factory, financial securities, company car, …
Consumer good = the final product which is sold to consumers 8

9. Four Factors of Production
ENTREPRENEURSHIP
Starting, operating, and expanding a business
Operate businesses to make a profit 9

10. Productivity
Measures the amount of output produced by a given number of inputs over a period of time.
Increased by the efficient use of production
Cost of producing good or service should be as low as possible
Creates a higher standard of living 10

11. How can a business manipulate its factors of production in order to increase its overall productivity?
Land?
Labor?
Capital?
Entrepreneurship? 11