U1;N3
Factors of Production:
What do you need to produce goods?
At this point, we have determined that economics is the study of how people and societies allocate
limited resources to meet unlimited needs. A basic economic problem is the need for individuals and
societies to make choices based on scarce or short economic resources because wants (and needs)
often exceed means. Economic resources are the natural, human, and synthetic resources that go
into the production of the goods and services on which we rely.
FIVE ECONOMIC RESOURCES
LAND
CAPITAL
Land includes all of the natural
resources that are used to make other
products. Such natural or raw resources
include minerals, water, arable soil,
vegetation, marine and other animal life,
and the atmosphere at large.
There are two types of capital:
Physical capital includes the man-made
resources used to produce other goods and
services (equipment, machinery,
technology, tools, physical spaces, etc.).
Human capital refers to the experience,
knowledge, and skills sets possessed by
workers who use these materials.
LABOR
INVESTMENT CAPITAL
ENTREPRENEURSHIP
Labor refers to the physical
and mental effort exerted by a
worker to complete a particular
set of tasks. The individual
worker is compensated for his/
her effort with monetary
payment.
Investment capital is often
called "start-up" capital
because it is the original set of
financial resources used to
acquire the land, labor, and
capital necessary to initiate the
business venture.
Entrepreneurship refers to
the individual who spearheads
a plan to acquire and organize
the factors of production in
order to establish a successful
business enterprise. The
entrepreneur generally has or
raises the investment capital.
TYPES OF GOODS & SERVICES
Generally speaking, consumers purchase durable goods, which have an expected life (or period of
use) of three or more years. Nondurable goods, on the other hand, have an expected life of less than
three years. Finally, consumers purchase services, which are typically intangible actions that warrant
the work of other people and/or institutions.
#
Question/Prompt
1
How long does a pair of sneakers
last?
2
How old is your car?
3
How long does a banana stay ripe?
4
How old is your winter coat?
5
What is the shelf-life of a (nonfrozen) chocolate bar?
6
How old is your cellphone?
Response
Is it durable or
nondurable?
How many years have you lived in
your home?
How long does a lined notebook
usually last?
7
8
Goods can be further broken down into two distinct categories: consumer and capital. Consumer
goods are products and services that directly satisfy consumer wants, whereas capital goods are
items used to produce other goods and services; therefore, capital goods do not directly satisfy
consumer wants.
#
Item
1
A car that you purchase for your personal use.
2
A van that is purchased by a florist for home
deliveries.
3
Furniture for someone's home.
4
Tools for a carpenter to craft furniture.
5
A Hershey (with almonds) bar.
6
The chocolate press used to make Hershey
(with almonds) bars.
7
Your television.
8
The forklift used to get your television from the
stockroom to the showroom floor.
Consumer/Capital
TYPES OF GOODS & SERVICES: Key
Generally speaking, consumers purchase durable goods, which have an expected life (or period of
use) of three or more years. Nondurable goods, on the other hand, have an expected life of less than
three years. Finally, consumers purchase services, which are typically intangible actions that warrant
the work of other people and/or institutions.
#
Question/Prompt
Is it durable or
nondurable?
Response
1
How long does a pair of sneakers
last?
Variable
N
2
How old is your car?
Variable
D
3
How long does a banana stay ripe?
A few days
N
4
How old is your winter coat?
Variable
D
5
What is the shelf-life of a (nonfrozen) chocolate bar?
Longer than most foods but
shorter than 3 years
N
6
How old is your cellphone?
Variable
D
Variable
D
Variable
N
How many years have you lived in
your home?
How long does a lined notebook
usually last?
7
8
Goods can be further broken down into two distinct categories: consumer and capital. Consumer
goods are products and services that directly satisfy consumer wants, whereas capital goods are
items used to produce other goods and services; therefore, capital goods do not directly satisfy
consumer wants.
#
Item
Consumer/Capital
1
A car that you purchase for your personal use.
Consumer
2
A van that is purchased by a florist for home
deliveries.
3
Furniture for someone's home.
4
Tools for a carpenter to craft furniture.
5
A Hershey (with almonds) bar.
6
The chocolate press used to make Hershey
(with almonds) bars.
7
Your television.
8
The forklift used to get your television from the
stockroom to the showroom floor.
Capital
Consumer
Capital
Consumer
Capital
Consumer
Capital