Introduction

• The factors of production are used in the process of producing goods and services.
• There are 4 factors of production:
  1. Land
  2. Labor
  3. Capital Goods
  4. Entrepreneurship
• These are often called 'producer goods and services'
  • As opposed to consumer goods and services, which are the result of production.

Land

• Land may refer to physical space, such as farmland
• But it can also be any natural resource, such as:
  • Water
  • Minerals and Ores
  • Fishing Areas
  • Sunlight

Labor

• Labor is the human part of the production process
• This means everyone, not just the frontline staff who work with the raw materials.
• Labor can be classified as either physical or mental.

Capital

• Capital refers to goods used to produce other goods and services .
• There are two types of capital:
  • Fixed capital refers to one time purchases, such as tools and machinary .
  • Working capital refers to goods that are used during the production process, such as raw materials.
• Infrastructure is also classified as a type of capital
  • This might include road networks, airports, docks and other methods of logistics and transport.
  • However it also includes other things necessary in the production process, such as power, water and communications systems (such as high speed internet).

Entrepreneurship

• Entrepreneurship is a later addition to the factors of production.
• Some economists classify it as a specialized form of labor, rather than seperating it into its own category.
• Entrepreneurs combine the other factors of production together in order to make money.
• Entrepreneurs are the drivers of innovation, and are responsible for economic growth.