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Factors of Production

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Factors of Production The factors of production include Factors of production what people use Renewable resource it can be drawn on Non-renewable resource a ... – PowerPoint PPT presentation

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Title: Factors of Production


1
Factors of Production
  • The factors of production include
  • Factors of production ? what people use
  • Renewable resource? it can be drawn on
  • Non-renewable resource ? a resource that cannot

2
Land and Labor
  • Land? all the natural
  • An acre of land, mineral deposits, and water in
  • Labor? the physical and mental talents that people

3
Capital and Physical Capital
  • Capital? any human-made resource that is used to
  • Physical capital? human-made goods that include
    buildings, tools, computers,
  • Physical capital is an important factor of
    production because it can

4
Example of Physical Capital
  • Example? lets say you have a family of 6 that
    washes dishes by hand after each meal (21 meals
    per week). It takes 30 minutes per meal for 2
    family member to do all the work. Thats 21
    hours per week that could have been spent on
    other more productive activities. As a result,
    they decide to buy a 400 dishwasher. Using the
    dishwasher it will take only 15 minutes for one
    person to clean up after each meal (5.25 hours
    per week). The benefits your family reaps from
    the free time will cover the cost of the new
    dishwasher. The following slide will show the
    typical benefits of physical capital

5
Benefits of Physical Capital
  • Extra Time? you no longer have to spend 21 hours
    doing dishes.
  • More Knowledge? by learning how to use the new
    machine,
  • More productivity? with extra time and extra
    knowledge, you can use your resources and labor to

6
Human Capital
  • Human capital? the skills and knowledge gained by
    a
  • An economy requires both physical and human
  • Example
  • doctors use stethoscopes and education to
    produce services
  • Assembly-line workers use equipment as well as
    skills acquired through training and practice to
    produce goods

7
Entrepreneurs
  • Entrepreneurship? the special talent that some
    people have for searching out and taking
    advantage of new business opportunities
  • They decide how to combine land, labor, and
    capital
  • An individual who opens a corner store and
    transforms it into a 10-store supermarket chain
    is an entrepreneur.

8
Using Scarce Resources
  • Economists say that all goods and services are
    scarce because the
  • Example? French Fries
  • The quantity of land and water for growing
    potatoes is limited
  • The labor available to grow the crop and to
    process and transport the potatoes is limited by
    the size, time, age, and energy of a population
  • Because land and labor are limited, the amount of
    physical capital to create the French fries (like
    farm equipment) is limited
  • No matter what good or service we look at,
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