Factors of Production FOP Factors of Production resources

Factors of Production

FOP Factors of Production: resources used to make all goods and services such as land, labor and capital

Land • All natural resources used to produce a good/service – Fertile land for farming and products in land such as coal, water and forests

Labor • Any effort a person devotes to a task for which that person is paid – Examples: repair man, doctor, artist

Capital • Any human-made resource that is used to create other goods and services • Physical Capital: Includes buildings and tools

Benefits of Physical Capital 1. Extra time 2. More knowledge 3. More productivity

• A family of 6 people washes dishes by hand every day after every meal---breakfast, lunch and dinner---a total of 21 meals per week. It takes 30 minutes per meal for 2 family members to clean the dishes. That’s 21 hours per week spent on this. Now, suppose the family decides to purchase a dishwasher for $400 that takes 15 minutes for a single family member to clean up. At this rate it takes the entire family 5 ½ hours per week to handle this chore.

Human Capital • Knowledge and skills a worker gains through education and experiences

Entrepreneur • Leaders who combine all the FOP to create the goods and services. Individuals who take risks to develop original ideas, start businesses, create new industries and fuel economic growth