Economic resources

What are the 4 factors of production?

1. Land

2. Labour

3. Capital

4. Enterprise

Land - definition

Natural, non man-made resources available for production.

Some countries have more than others

Labour - definition

Human input into the production process.

Human capital - the value labour brings to prodcution.

Labour force - definition

The population that can work.

Capital - definition

Man-made resources that are used to produce goods/ services in the production process.

Enterprise - definition

The entrepreneurial actions (like establishing firms or taking risks) that individuals take to generate a project.

What are different types of labour

Skilled/ unskilled

Mental/physical

What is money in these categories?

Financial capital

How is the environment a scarce resource?

Much of what we use up in economic activity is non-renewable.

How is air scarce?

Even though its not finite, clean non-polluted air is.

How is water scarce?

Even though theres a lot of it globally, a lot is useless due to the saltiness, and much is polluted with plastic.

Some areas have shortages in water, as it isn’t distributed equally across the world.

How are resources obtained from the environment priced?

Through the market mechanism (supply and demand)

Factor market - definition

A market where factors of production are bought and sold.

Factor income - definition

The flow of income that is derived from factors of production

Rewards/ income from each of the 4 factors of production

Land - Rent

Labour - wages

Capital - interest (return on capital)

Entrepreneurship - profit

Why must resources be allocated carefully?

As resources are scarce so we need to make choices on who gets what

Opportunity cost - definition

The loss of the next best alternative when making a decision - what you have to give up

Trade off definition

Compromise between two or more options

The act of giving up one thing to get something else

Difference between trade offs and opportunity cost

Trade off is the decision itself whereas the opportunity cost would be the benefits of the option that wasn’t chosen, which are now lost