Text a: factors of production Active Vocabulary

Key terms: factors of production, (permanent/recyclable) land, labour, (human) capital, workforce, information, goods and services, natural resources, satisfaction, value, human capital, labour supply, human resource, human efforts, revenue, wage, salary, demand for, activities, facilities, utility, enterprise, productive output, contribution. Other words and expressions: available to, reusable, fixed, irreproducible, expansible, compressible, substitutional, transportable, to consume smth, diffusive, shareable, to derive from, contribution of smth, to depend on, decision-makers, to be extended into, endangered species, to protect from, to depreciate from time and use, to be in perpetuity, to be applied to smth. Linking words and phrases: that is, in fact, such as, as well as, in contrast, whenever, however, either … or, thus, ultimately, in turn, not only … but also.

Choices concerning what goods and services to produce are choices about an economy’s use of its factors of production, the resources available to it for the production of goods and services. The value, or satisfaction, that people derive from the goods and services they consume and the activities they pursue are called utility. Ultimately, then, economy’s factors of production create utility; they serve the interests of people.

The factors of production in an economy are its labour, capital, enterprise and natural resources.Labour is the human effort that can be applied to the production of goods and services. People who are employed or would like to be are considered part of the labour available to the economy. Capital is a factor of production that has been produced for use in the production of other goods and services. Office buildings, machinery, and tools are examples of capital. Enterprise means the activities of profit-seeking decision makers who determine which economic activities to undertake and how they should be implemented. Natural resources are the resources of nature that can be used for the production of goods and services.

The fifth factor -information– is sometimes included as a factor of production in modern economics.

Natural resources – land and mineral deposits

The factor of production land comprises not only the actual land on which the firm has its factory or offices but also all the natural resources, such as the minerals, raw materials, vegetation and wildlife that can be extracted from it.

Land is not produced, it was created. It is the world, the planet from which man evolved, with the sun that energizes it and the orbit that tempers it. Mankind did not create the Earth with its space and resources, nor can we add to them. We can only acquire them, often by fighting, or rent-seeking, or in other counterproductive ways. Man at best improves and develops capacities inherent in the free gift.

"Land" in economics means all natural resources and agents, with their sites (locations and extensions in space).

Economic land excludes many things, too. It excludes land-fill, for example, by which many cities are extended into shallow waters. The site and seabed are properly land; the land-fill is an improvement. There is no "made land" in the economic sense: it is reallocated from other uses. Expanding cities take farmland from producing food and fibre, much of it for the expanding city itself. Filled land in shallow water near cities is taken away from anglers and sailors and viewers and ecologists, who now organize to save it from being "made" away with. Drained and filled wetlands are taken away from endangered species, as well as from their primal role as filters protecting coastal waters from river trash and pollutants.

Land as site is permanent and recyclable. Land as "site" (location plus extension) does not normally wear out, depreciate, spoil, obsolesce, nor gets used up by human activities incident to occupancy and production. In contrast, capital depreciates from time and use. After being formed, it must be conserved from entropy by continual maintenance, repair, remodelling, safeguarding against theft and fire, and so on. Land normally does not depreciate as a function of time. Most attributes of land also withstand use and abuse. Population, capital, and demands all grow while land remains fixed.

Land is reusable. All the land we have is second-hand, most of it previously-owned. Our descendants, in turn, will have nothing but our hand-me-downs. As there is never any new supply, the old is recycled periodically, and will be in perpetuity, without changing form or location.

Land supply is fixed.Being both irreproducible and permanent, land remains fixed. Both the overall quantity and the special qualities of specific lands remain fixed.