4 factors of production and examples of each

Specifically, we combine them with the aim of earning a profit. EntrepreneurshipĮntrepreneurship or enterprise is what we need to combine the other factors of production – capital, labor, and land. We refer to the income of capital resource owners as interest. A doctor, on the other hand, uses an examination room, a stethoscope, and other medical devices. The type of capital we utilize depends on the work we are doing.įor example, a teacher uses desks, a whiteboard, and textbooks to deliver education services. Examples include computers, delivery vehicles, conveyor belts, forklift trucks, hammers, etc.

Specifically, it includes those elements that we use to produce goods and services. CapitalĬapital includes machinery, tools, and buildings. Wages, for most people, are their largest source of income. We refer to labor resource income as wages. It also includes everything the waiter in your local restaurant does when you want to order a meal.Īny person who has received money for work has contributed labor resources to the production of goods or services. Resources include, for example, the work that the engineer who designed a bridge did. Labor refers to the effort that humans contribute to the production of goods and services. Resource owners earn rent in return for land. Oil or natural gas, on the other hand, are non-renewable resources. Forests, coal, natural gas, copper, oil, and water, for example, belong to the category common land or natural resources.įorests are among the renewable resources. This also includes any natural resource we use to produce goods and services. This factor includes land plus anything that comes from the land. We divide the factors of production into the following four categories: Land, Labor, Capital, and Enterprise.Īccording to the Bank of England, in the short to medium term, estimates of a country’s productivity can be affected by the intensity with which factors of production are utilized. In other words, they are the inputs that we use to produce goods and services so that we can make an economic profit. The factors of production are the building blocks of any economy.

4 factors of production and examples of each