Limited Means and Resources+ Factors of Production

We have limited means.

We only have 24 hours in a day, a limited amount of skills (we are not the good at everything as much as we hope we are), and we have limited money (it doesn’t grow on trees!)

We have limited resources.

Resources can be divided into 3 categories:

1. natural: these are what is provided for by nature e.g. raw materials
2. human: work done by people e.g. teacher, driver, lawyer
3. human-made: goods made to produce other goods e.g. machinery, hammer

When resources are used in production they are known as factors of production.There are 4 of them:

1. Land: provided for by nature with little or no human input
2. Labour: work done by people to produce goods and services
3. Capital: machinery and all other goods that are used to produce other goods and services
4. Enterprise: the act of combining the other factors of production in order to produce goods and services. The entrepreneur assumes the risk of enterprise in order to make a profit. 

 

The factors of production earn. 

Land earns rent

Labour earns wages or salaries

Capital earns interest and dividends

Entrepreneurs earn profits