Factors of Production & Related Vocabulary

Vocabulary flashcards covering key terms and definitions related to the four factors of production—land, labor, capital, and entrepreneurship—as well as supportive concepts from the lecture.

Factors of Production

The four basic resources—land, labor, capital, and entrepreneurship—used to produce goods and services.

Land (Natural Resources)

Items obtained from nature that can be used to create goods or services, such as soil, oil, timber, or scenic wilderness.

Characteristics of Natural Resources

1) Found in nature without human alteration; 2) Usable in the production of goods or services once their value is understood.

Ways to Expand Natural Resources

Discovering new resources, finding new uses for existing resources, or developing new extraction methods.

Labor

Human effort—physical or mental—applied in the production of goods and services, including both employed and unemployed persons willing to work.

Human Capital

Skills and knowledge acquired through education, training, and experience that enhance a worker’s productivity.

Capital (Capital Goods)

Produced resources such as tools, machinery, buildings, or software used to manufacture other goods and services.

Criteria for Capital

A resource must (1) be produced and (2) be usable to produce other goods or services.

Financial Capital

Money and paper assets (stocks, bonds) that represent claims on future payments; used to acquire real factors of production but not productive by themselves.

Entrepreneur

A risk-taking individual who organizes land, labor, and capital to produce goods or services for profit.

Entrepreneurial Risk

The possibility of loss an entrepreneur accepts when introducing new products, technologies, or organizational methods.

Technology (in Production)

Knowledge or techniques applied to combine factors of production more efficiently or in new ways.

Capital Goods vs. Money

Capital goods directly aid production (e.g., machines); money merely purchases those goods and is not itself productive.

Labor Force Expansion

Increasing the number of available workers or the average hours worked, or enhancing workers’ human capital.

Circular Flow of Economic Activity

Model illustrating how households and firms exchange resources, goods, services, and money, generating an economy’s wealth.