9. What is the reason people cannot satisfy all their wants and needs?

The reason people cannot satisfy all their wants and needs is the scarcity of productive resources. Economists explain that scarcity is the amount of resources available relative to people’s wants. So the scarcity of resources can change if the amounts of resources or people’s wants increase or decrease.

We try to explain this economic term. It is generally known that natural, human and capital resources are scarce. There simply is not enough of everything for everyone. Thus everyone faces scarcity. Consumers want more than they can afford. People don’t have enough time to get everything done. Even businesses face scarcity. The people who own and manage businesses can’t hire all the workers they would like to have or buy all the equipment and supplies they want. Likewise, governments face a scarcity of funds, despite their power to raise money through taxation. Consequently, we all must make choices about using money, time and other resources.

10. What are the factors of production?

Factors of production provide the means for a society to produce and distribute its goods and services. Factors of production are called land, labour, capital, and organization or entrepreneurship.

As an economic term land means the gifts of nature or natural resources not created by human efforts. They are the things provided by nature that go into the creation of goods and services.

The second factor of production is labour — people with all their efforts and abilities. Unlike land, labour is a resource that may vary in size over time.

The third factor of production is capital — the tools, equipment and factories used in production of goods and services. Capital is unique in that, it is the result of production.

The managerial or organizational skills needed by most firms to produce goods and services, is the fourth factor of production. The entrepreneur brings together the other three factors of production — land, labour and capital.

11. What does the term “land” mean?

As an economic term land means the gifts of nature or natural resources not created by human efforts. They are the things provided by nature that go into the creation of goods and services.

Land has a broad meaning. It is not only land itself, but also what lies under the land, what grows naturally on top of the land, what is around the land in the seas and oceans. It includes deserts, fertile fields, forests, mineral deposits, rainfall, sunshine and the climate necessary to grow crops. Economists tend to think of land as being fixed or in limited supply. There is not enough good farmland to feed all of the earth’s population enough, sandy beaches for everyone to enjoy, or enough minerals to meet people’s expending energy needs indefinitely. Land is one of the primary factors of production. It is one which quantity is determined outside the economy.

12. What does the term “labour” mean?

Labour as the second factor of production is people with all their efforts and abilities. It is a resource that may vary in size over time. Historically, factors such as population growth, immigration, famine, war and disease have had a dramatic impact on both the quantity and quality of labour. If the growth of population declines, it eventually affect the growth of the labour force. However a labour shortage could be made up by workers from other countries.

There are four major categories of labour that are based on the general level of skills needed to do any kind of job. These categories are unskilled, semiskilled, skilled and professional or managerial. Labour is the human input into the production process. It may be mental or physical. But in many tasks it is necessary to combine mental activity with physical effort. The price paid for the use of labour is called wages.