introduction to principles and practices of economics

Economics identifies four basic resources used to produce goods and services. These are called the factors of production . They include land, labor, capital, and entrepreneurship. Every economy must manage and allocate these resources efficiently to meet its needs.

          2.1 land, labor, capital and entrepreneurship

       1)  land

.Refers to all natural resources used in production.

.includes minerals, water, forests and land area.

           2)capital

.man-made tools, machines and buildings used in production

.Excludes money unless it's used to buy productive resources

                 3)labor

.the human effort(physical and mental ) used to produce goods, example ;teachers engineers etc.    

          4)entrepreneurship

. the skills and willingness to organize the other three factors, take risks and innovate.

         2.2Rewards for factors of production

each factor earns income in return for it's contribution to production process

.Rent- for land and natural resources

.wages-for labor and services provided by workers

.interest- for the use of capital or investments

.profit- for entrepreneurial risk taking and innovation.