Economic

Factors of production

The recources that go into the creation of goods and services are called the factors of production. The factors of production include natural resources, human resources, capital and entrepreneurship. Each factor of production has a place in economic system, and each has a particular function. People who own or use a factor of production are expecting a return or reward. This generates income which, as it is spent, becomes a kind fuel that drives the economy.

Natural resources or (land)

Natural resources are the things provided by nature that go into the creation of goods and services.

They include such things as minerals, wildlife and timber resources. Economists also use the term land when they speak of natural resources as a factor of production. The price paid for the use of land is called rent. Rent becomes income to the owner of the land.

Human resourcesnor labor

Economists call the physical and mental effort that people put into the creation of goods and services labor. The price paid for the use of labor is called wages. Wages represent income to workers, who own their labor.

Capital

To the economists, physical capital (or (capital) as it is commonly called) is something created by people to produce other goods and services. A factory, tools and machines are capital resources because they can be used to produce other goods and services. The term capital is ofter used by business people to refer to money they can use to buy factories, machinery and other similar productive resources. Payment for the use of someone else’s money, or capital, is called interest.

Enterpreneurship

Closely associated with labor is the concept of entrepreneurship, the managerial or organizational skills needed by most frims to produce goods and services. The entrepreneur brings together the other three factors of production. When they are successful, entre-preneurs earn profits. When they are not successful, they suffer losses.