Objective 8: Factors of Production
The production of goods and services depends on four basic categories of resources, which are interdependent in the production process.
What are the four basic resources (factors of production), and how are they interdependent?
Factors of production
- Labor, also called human resources, is any form of human effort used in the production of goods and services.
- Capital is human-made resources (e.g., tools, buildings, equipment) used in the production of other goods and services.
- Natural resources, also called land resources, are items provided by nature that are used in the production of goods and services.
- An entrepreneur is the risk-taker who organizes the other resources for production.
All production depends on natural resources, which need capital for conversion to usable goods and labor to make the conversion.
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