V. Additional Reading

Read the following texts to learn more about the problem under discussion.

Land, labour, capital, and entrepreneurship. These are four generally recognized factors of production. Of course, in a literal sense anything contributing to the productive process is a factor of production. However, economists seek to classify all inputs into a few broad categories, so standard usage refers to the categories themselves as factors. Before the twentieth century, only three factors making up the "classical triad" were recognized: land, labour, and capital. Entrepreneurship is a fairly recent addition.

The factor concept is used to construct models illustrating general features of the economic process without getting caught up in inessential details. These include models purporting to explain growth, value, choice of production method, income distribution, and social classes. A major conceptual application is in the theory of production functions. One intuitive basis for the classification of the factors of production is the manner of payment for their services: rent for land, wages for labour, interest for capital, and profit for entrepreneurship.

The key production factors, i.e. labour, land, capital and entrepreneurial talent were identified long time ago. But for how long will these factors prevail? Labour will undoubtedly remain to be the key factor, but its specifics will tend to change as it will be based primarily on intellectual capacities of the people, on their ability to think creatively and strategically. This cannot be delegated to a machine or a computer. So which production factors will prevail in the distant future, what will be their main features?

VI. Speaking

1. Giving your opinion

Give your opinion on the following issues.

1. Can you imagine a world without scarcity – a world where nobody had to work and people could have everything they wanted free of charge? Would you enjoy living in such a world? Why / why not? Have there ever been any attempts in the history of mankind to create a society without scarcity?

2. Think of a product you have recently purchased. How do you think the four factors of production were used to create this product?

2. Discussion

Work in pairs or groups. Discuss your answers to the following questions.

1. Is famine during a drought the result of scarcity or of a shortage?

2. What theory, macroeconomic or microeconomic, would apply to the following situations?

1. a government manages its imports and exports;

2. an individual chooses what to buy at a store.

3. Simulation

Divide into two or three groups for a simulation. It will focus on starting up a business. Appoint a moderator to evaluate the groups’ performance. Follow the procedure below.

1. With your group, decide on a business you want to start. This could be anything that has a realistic chance of succeeding: computer technician, T-shirt printer, clothes retailer, window cleaner, babysitter, or anything you think may fulfil a want.

2. On a chart like the one below, list the factors of production you will need to start and run your business.

   Land 1. 2. 3.	Labour 1. 2. 3.
   Capital 1. 2. 3.	Entrepreneurship 1. 2. 3.

3. Develop a business plan – a way that you can use the factors of production so efficiently that you will be able to make money.

4. Present your plan to the rest of the class. When all pairs or groups have made their presentations, hold a class vote to select the best plan.