EM - Economic Resources [LESSON]

Economic Resources

Factors of Production

Economics is the study of the production, distribution, and consumption of goods and services. Resources are the inputs used to produce outputs. Resources may include any or all of the following:

• Land and other natural resources
• Labor (physical and mental)
• Capital, including buildings and equipment
• Entrepreneurship

Resources are combined to produce goods and services. Land and natural resources provide the needed raw materials. Labor transforms raw materials into goods and services. Capital (equipment, buildings, vehicles, cash, and so forth) are needed for the production process. Entrepreneurship provides the skill and creativity needed to bring the other resources together to produce a good or service to be sold to the marketplace.

Because a business uses resources to produce things, we also call these resources factors of production.

The factors of production used to produce a shirt would include the following:

• Land - The land that the shirt factory sits on, the electricity used to run the plant, and the raw cotton from which the shirts are made
• Labor - The laborers who make the shirts
• Capital - The factory and equipment used in the manufacturing process, as well as the money needed to operate the factory
• Entrepreneurship - The entrepreneurship skill used to coordinate the other resources to initiate the production process and the distribution of the goods or services to the marketplace

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