Text 4. Factors of production. The resources that go into the creation of goods and services are called the factors of production

The resources 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.

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 resources or “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 economist, physical capital is something created b 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 often 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.

Entrepreneurship. Closely associated with labor is the concept of entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services. The entrepreneur brings together the other three factors of production. When they are successful, entrepreneurs earn profits. When they are not successful, they suffer losses. The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business, they obtain the money that remains after the owners of land, labor and capital have received their payments.

Questions:

1) What is called the factor of the production?

2) What do the factors of the production include?

3) What is called as natural resources?

4) What do natural resources include?

5) What do human resources include?

6) What is called as human resources?

7) What is capital?

8) What does capital include?

9) What is entrepreneurship?