Production

Factors of production
Anything that contributes towards output
is a factor of production.
Capital Machinery, buildings, computers
Land soil, crops, minerals etc
Labor Human Effort

Production Analogy

Capital and nitrogen Limiting Reagent

Labor and hydrogen Available in abundance
Land Compression Chamber
Entrepreneurship Catalyst

F.O.P in IT World
Significance of land diminishes.
Factors transform.
New FOPs:
Man (Human Capital)
Machine (Technology Capital)
Money (Financial Capital)

Importance of Capitalization
Machinery
Robinson Crusoe spent 6 hours making a
fishing net.
6 hours of no fish.
Or 6 hours less of leisure.
Increased returns.

Man
A man calculates using addition.
Learns multiplication for 1 hour.
Increased calculation speed.

Importance of Capitalization

Money (Wealth)
Car used for personal use does not
generate capital.
When used as a taxi it generates further
wealth.