The Beechmont Crest Guide to Economics
Factors of Production
Factors of production are all the resources used to produce goods and services. Factors of production can be divided into four basic categories: labor, capital, land, and entrepreneurship.
Labor in the economic context is defined as human effort, whether mental or physical. Therefore, the computer programmer, the steel worker, and the administrative paper pusher are all engaging in labor (as economists see it).
Capital is a manufactured good that is used in the production, marketing, or distribution of goods and services. Examples of capital include:
Industrial robots
Machine tools
Delivery trucks
Office equipment
and much, much more
Land includes real estate (i.e., the acreage where a new shopping center will be built), as well as the natural resources that the land contains. Timber, minerals, and water resources are all grouped under the category of land.
Entrepreneurship is risk, creativity, and effort that go into the creation of a new business enterprise. Businesses like Ford Motor Company, Microsoft, and Apple Computer didn’t just appear out of nowhere. Entrepreneurs (Henry Ford, Bill Gates, and Steve Jobs/Steve Wozniak) had to first imagine them, and then endure the risks and hardships needed to bring them to fruition.