LABOR Any effort a person devotes to a task for which that person is paid
CAPITAL Any human made resource that is used to create other goods and services Physical capital goods like building and tools for the purpose of productionPhysical capital goods like building and tools for the purpose of production Human capital is the knowledge and skills a worker gains through education and experienceHuman capital is the knowledge and skills a worker gains through education and experience
ENTREPRENEURSHIP A person who assembles the factors of production to create goods and services Risk-taker!
Tying it all together… Maintaining a proper functioning a free market is not easy or simple The Pillars of Free Enterprise
Pillar Explanation (From producer view & consumer view) Example Private PropertyFor purposes of business enterprise, or as a result of consumer choice Factory owner Home owner Car owner ChoiceFor purposes of production and profit, to fulfill consumer wants/needs open a business Choose a profession job Consumer choice Voluntary ExchangeWhere the producer and consumer come together: the marketplace (willingly buy or sell) Places of exchange (mall, internet) Contracts CompetitionWithin industries –maintain quality and fair prices, As consumers (demand) push prices up Gas stations, Airline industries, Supermarkets, Stock Market Economic IncentivesFor purpose of profit, wage, interest, Or “get a good deal” Successful entrepreneurs make big money -profit Salary, Fringe benefits
PAYMENTS: Economic Incentive RENTSALARYINTERESTPROFIT LAND LABOR CAPITAL ENTRE- PRENEURSHIP
Government’s Role? From Res. Owners to Gov’t – taxes – Productive services From Bus. Owners to Gov’t – taxes – business services From Gov’t to Res Owners – money payments – Gov’t services From Gov’t to Bus Owners – money payments – Gov’t services
Gross Domestic Product one of the primary indicators used to gauge the health of a country's economy at its most basic: a total of what everyone has earned in a year (income approach), or by a total of what everyone spent (expenditure method). what GDP represents, has a large impact on nearly everyone within that economy Adapted from: http://www.investopedia.com/ask/answers/199.asp
HOW DO THE FOUR FACTORS OF PRODUCTION AND THE CIRCULAR FLOW OF ECONOMIC ACTIVITY RELATE TO … UNEMPLOYMENT? BUSINESS GROWTH? MINIMUM WAGE? GOVERNMENT SPENDING?