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Land
o Land is the economic resource encompassing natural resources found
within a nation’s economy. This resource includes timber, land,
fisheries, farms and other similar natural resources. Land is usually a
limited resource for many economies. Although some natural
resources, such as timber, food and animals, are renewable, the
physical land is usually a fixed resource. Nations must carefully use
their land resource by creating a mix of natural and industrial uses.
Using land for industrial purposes allows nations to improve the
production processes for turning natural resources into consumer
goods.
Labor
o Labor represents the human capital available to transform raw or
national resources into consumer goods. Human capital includes all
able-bodied individuals capable of working in the nation’s
economy and providing various services to other individuals or
businesses. This factor of production is a flexible resource as workers
can be allocated to different areas of the economy for producing
consumer goods or services. Human capital can also be improved
through training or educating workers to complete technical functions
or business tasks when working with other economic resources.
Capital
o Capital has two economic definitions as a factor of production. Capital
can represent the monetary resources companies use to purchase
natural resources, land and other capital goods. Monetary resources
flow through a nation’s economy as individuals buy and sell
resources to individuals and businesses. Capital also represents the
major physical assets individuals and companies use when producing
goods or services. These assets include buildings, production facilities,
equipment, vehicles and other similar items. Individuals may create
their own capital production resources, purchase them from another
individual or business or lease them for a specific amount of time from
individuals or other businesses.
Entrepreneurship
o Entrepreneurship is considered a factor of production because
economic resources can exist in an economy and not be transformed
into consumer goods. Entrepreneurs usually have an idea for creating a
Land
In its simplest form, land is the physical place where economic activity takes place. In our lemonade
stand example, it could be the patch of lawn in front of your house. However, land also includes all
the natural resources found on it.
Resources can include timber, water, oil, livestock, and so forth. So if you used real lemons from a
tree in your yard to make that lemonade, you used part of the land. Land plays an important part in
production because land itself and the resources on it are usually limited. Political regulations
prevent a person from just going and claiming something for themselves, or there may not be
enough for everyone to have. Also, many of the natural resources are nonrenewable, meaning that
their amount is fixed, and they can't be used indefinitely. Thus, producers must carefully manage
land and its resources.
Labor
It seems obvious, but things can't be produced unless someone makes them. Your lemonade won't
make itself, and it won't sell itself if you aren't there to do it. Therefore, another important factor of
production is labor. Labor represents all of the people that are available to transform resources into
goods or services that can be purchased. This factor is somewhat flexible since different people can
be allocated to produce different things. Nobody has to produce everything themselves. That would
be impractical. It's also important that a labor force is well educated and well trained to ensure that
they can produce goods at peak efficiency and quality.
Capital
Perhaps to get your lemonade stand up and running, you also needed money to make signs to
advertise your delicious drink. You may also have used a small table to set up your pitcher and cups.
Both of these things - money and equipment - are considered capital. More specifically, capital can
be the money that companies use to buy resources, as well as the physical assets companies use
when producing goods or services, such as factories and machinery.
Capital is an important factor of production because it's what allows labor and land to be purchased.
Steady streams of capital are often required in order to keep a business going.
Land:
Land includes all natural physical resources e.g. fertile farm land, the
benefits from a temperate climate or the harnessing of wind power and solar
power and other forms of renewable energy.
Some nations are richly endowed with natural resources and then specialise in
the their extraction and production for example the high productivity of the
vast expanse of farm land in the United States and the oil sands in Alberta,
Canada. Other countries such as Japan are heavily reliant on importing these
resources.
Labour:
Labour is the human input into production e.g. the supply of workers available
and their productivity
An increase in the size and the quality of the labour force is vital if a country
wants to achieve growth. In recent years the issue of the migration of
labour has become important. Can migrant workers help to solve labour
shortages? What are the long-term effects on the countries who suffer a drain or
loss of workers through migration?
Capital:
Capital goods are used to produce other consumer goods and services in the
future
Cross Rail
Entrepreneurship
Entrepreneurs will usually invest their own financial capital in a business and
take on the risks. Their main reward is the profit made from running the business
Microeconomic Goals
Efficiency and equity are the two microeconomic goals most relevant to markets, industries,
and parts of the economy, and are thus important to the study of microeconomics.
Efficiency: Efficiency is achieved when society is able to get the greatest amount
of satisfaction from available resources. With efficiency, society cannot change the
way resources are used in any way that would increase the total amount of
satisfaction obtained by society. The pervasive scarcity problem is best addressed
when limited resources are used to satisfy as many wants and needs as possible.
While efficiency is indicated by equality between demand price and supply price for a
given market, there are no clear-cut comprehensive indicators for attaining this
efficiency goal. While it is possible, in theory, to pinpoint what is needed for
efficiency, the complexity of the economy makes the task difficult to accomplish in
practice.
Equity: Equity is achieved when income and wealth are fairly distributed within a
society. Almost everyone wants a fair distribution. However, what constitutes a fair
and equitable distribution is debatable. Some might contend that equity is achieved
when everyone has the same income and wealth. Others contend that equity results
when people receive income and wealth based on the value of their production. Still
others argue that equity is achieved when each has only the income and wealth that
they need.
Equity means income and wealth are distributed according to a standard of fairness.
But what is the fairness standard? It could be equality. Or it could be the productive
value of resources. Or it could be need. Standards for equity moves into the realm
of normative economics.
Macroeconomic Goals
Full employment, stability, and economic growth are the three macroeconomic goals most
relevant to the aggregate economy and consequently are of prime importance to the study
of macroeconomics.
There is no nation without objectives. Any economy should have goals to show society. These are "my
chosen goals", but as you get familiar with your studies, you will discover many many more.
1. Economic Efficiency Getting the maximum output or a good from the resources used in production.
2. Equity of Fairness Good distribution of welfare.
3. Economic Growth Increase in output (real GDP) an expansion of production possibilities.
4. Economic Stability - Pursuing economic stability: avoiding economic and financial crisis, inflation and is
a national concern.
5. Employment Growth Positive change in the level or production of goods and services by a country
over a certain period of time.
Macro economics is the study of the whole economy. It looks at aggregate variables,
such as aggregate demand, national output and inflation.
Monetary / fiscal policy. e.g. what effect does interest rates have on the whole economy?
Economic growth
Reasons for differences in living standards and economic growth between countries.
Government borrowing