1. Factors of Production The factors of production include Factors of production  what people use Renewable resource  it can be drawn on Non-renewable resource  a resource that cannot

2. Land and Labor Land  all the natural An acre of land, mineral deposits, and water in Labor  the physical and mental talents that people

3. Capital  any human-made resource that is used to Physical capital  human-made goods that include buildings, tools, computers, Physical capital is an important factor of production because it can Capital and Physical Capital

4. Example of Physical Capital Example  let’s say you have a family of 6 that washes dishes by hand after each meal (21 meals per week). It takes 30 minutes per meal for 2 family member to do all the work. That’s 21 hours per week that could have been spent on other more productive activities. As a result, they decide to buy a $400 dishwasher. Using the dishwasher it will take only 15 minutes for one person to clean up after each meal (5.25 hours per week). The benefits your family reaps from the free time will cover the cost of the new dishwasher. The following slide will show the typical benefits of physical capital…

5. Benefits of Physical Capital Extra Time  you no longer have to spend 21 hours doing dishes. More Knowledge  by learning how to use the new machine, More productivity  with extra time and extra knowledge, you can use your resources and labor to

6. Human Capital Human capital  the skills and knowledge gained by a An economy requires both physical and human Example: – doctors use stethoscopes and education to produce services –Assembly-line workers use equipment as well as skills acquired through training and practice to produce goods

7. Entrepreneurs Entrepreneurship  the special talent that some people have for searching out and taking advantage of new business opportunities They decide how to combine land, labor, and capital An individual who opens a corner store and transforms it into a 10-store supermarket chain is an entrepreneur.

8. Using Scarce Resources Economists say that all goods and services are scarce because the Example  French Fries: –The quantity of land and water for growing potatoes is limited –The labor available to grow the crop and to process and transport the potatoes is limited by the size, time, age, and energy of a population –Because land and labor are limited, the amount of physical capital to create the French fries (like farm equipment) is limited No matter what good or service we look at,