1.3 Economic Resources

Factors of production

Land, Labour, Capital and enterprise

Capital

Description

Physical goods which can be used in the production process

Fixed : Machines; buildings working: finished or semi finished consumer goods.

Reward/Incentive

interest from the investment

Entrepreneurship (capital)

Description

Managerial ability. The entrepreneur is someone who takes risks, innovates, and uses the factors of production. Resources are drawn together into the production process.

Reward/Incentive

Profit

An incentive to take risks

Land

Description

Natural resources such as oil, coal, wheat, water. It can also be the physical space for fixed capital.

Reward/Incentive

Rent

Labour

Description

Human capital, which is the workforce of the economy.

Reward/Incentive

Wages

Renewable Resources

can be replenished, so the stock level of recourses can be maintained over a period of time. If the resource is consumed faster than it is renewed, the stock of resources will decline over time.

(environmental economics)

can be managed by preventing or limiting deforestation, or imposing fishing quotas. Renewable resources are sustainable. However currently resources are being consumed faster than the planet can replace them. The Worldwide Fund for Nature claims that 2 planets will be required to meet global demand by 2050 if this continues.

Non-renewable resources

cannot be renewed. For example, things produced from fossil fuels such as coal, oil, natural gas are non-renewable. The stock level declines over time as it is consumed. methods such as recycling and finding substitutes, such as wind farms, can reduce the rate of decline of the resource.