Year 1 1.3 Economic Resources

Factors of production

are the resources used to produce goods and services

Goods

are physical objects that can be touched(tangible) 

services

are actions or activities that one person performs for another(intangible)

Land

Non man-made natural resources available for production 

• Some countries have a vast amount of a particular natural resource and so are able to specialise in its production e.g. oil

Labour 

Human input into the production process 

• Labour involves mental or physical effort

• It can be skilled or unskilled 

Capital

• Capital is any man-made resource that is used to produce goods/services 

Enterprise

Enterprise involves taking risks in setting up or running a firm

• Entrepreneurs decides om the combinations of FOPs necessary to produce goods/services with the aim of generating profit  

Financial rewards for FOPs

• Households receive the following financial rewards (factor income) for selling their FOPs.

Factor income for land → Rent 

Factor income for labour → Wages 

Factor income for capital → Interest 

Factor income for entrepreneurship →profit 

The Environment as a scarce Resource

• Increased economic activity causes the degradation of environmental resources

• This is where current generations overconsume, resulting in scarcity 

• Non-renewable resources are limited in supply and will run out 

• Renewable resources should be infinite in supply 

Clean water will eventually run out if not treated properly 

This gives rise to sustainability, which means meeting the needs of current generations without compromising the needs of future generations