Essential question: How are goods Produced? Factors of Production Essential question: How are goods Produced?

HOW ARE GOODS PRODUCED? Land (Natural Resources) Factors of production The productive resources used to produce goods and services. Factors of production are grouped into four categories: Land (Natural Resources) Labor (Human Resources)  Capital  Entrepreneurship

Land HOW ARE GOODS PRODUCED? What Raw materials are needed to produce your product? The “gifts of nature” that we use to produce goods and services. All the things we call natural resources. Comes from the air, water, or the earth Renewable SOURCES Water, air growing things Non-Renewable SOURCES Coal, oil

Factor 1: Natural Resources Nature supplies raw materials necessary to make things These raw materials are called Natural Resources Example: Chicken noodle soup contains chicken meat, spices, water, and vegetables, all of which came from the nature

Labor HOW ARE GOODS PRODUCED? People’s efforts, labor What will your employees have to do to create your product? What work will need to be done to turn your raw material into your finished product Work time and work effort that people devote to producing goods and services People’s efforts, labor Effort can be physical or mental

Factor 2: Human Labor Human effort used to produce goods and services is called labor. Labor can be physical or mental Example: to the soup, farmers raise the animals and crops, a truck driver drives them to a factory, and workers operate machinery to mix and can it (physical labor) Someone has to design the machines, and think of a recipe for the soup (mental labor)

Capital HOW ARE GOODS PRODUCED? equipment and people will you need to create your product (materials or money) Physical capital: What tools, machines and factories will you needed to create your product Financial capital: funds the firm use to buy physical capital Human capital: What knowledge, skills, education and experience will your employees need to have in order to produce your product (for example: a seamstress , a chemist, a computer technician ) capital goods. Tools, instruments, machines, buildings, and other constructions that have been produced in the past and that businesses now use to produce goods and services.

Factor 3: Capital Resources Producing goods and services requires tools and equipment The buildings, machines, supplies, etc. used to produce are called capital resources, or capital goods Examples: the truck used to drive to the factory, the machines used to can the soup, and the factory building itself

Entrepreneurship HOW ARE GOODS PRODUCED? The human resource (PEOPLE) that organized and combines labor, land, capital. The quantity and quality of entrepreneurship is hard to describe and measure. But we can easily recognize brilliant entrepreneurs by their enormous financial success. They are the ones that provide the ideas of what to make and how Sam Walton (Wal-Mart), Bill Gates (Microsoft), and Michael Dell (Dell Computers) are examples of outstanding entrepreneur's. 

Factor 4: Entrepreneurship Making the other 3 factors of production into something useful often takes creativity and some risk Entrepreneurship is the factor of production that ties the others together  Examples: Someone has to decide what to name the soup, where to sell it, and how much to charge

All Economic Systems Must Consider the Following Questions: What goods and services to produce? How will they produce them? Who will get them? How much will they produce now, and how much later? Each economic system answers these questions in a DIFFERENT WAY.

Stop and Think If you started your own business what would it be? What are some of the 4 Factors of production you would need? List 2 examples for each. Land Labor Entrepreneur Capital