22. Why can some economic issues never be decided by using facts?

Should the government give money to poor people? Should the budget deficit be reduced by higher taxes or by lower spending? There are no right or wrong answers to these questions as they involve ethics and values rather than facts. Thus, these issues can be debated, but they can never be decided by using facts as they are solved by political decisions, not by economic science.

23. What is the relationship between positive and normative economics? Since most assertions are not easily classified as purely positive or purely normative statements, they must be combined to make a good policy statement. One must decide what goals are desirable (the normative part), and choose a way of attaining those goals (the positive part).

Factors of Production

1/ What are economic resources?

Economic resources are the goods or services available to individuals and businesses used to produce valuable consumer products.

2. Why is it important for a society to use economic resources efficiently?

They are scarce relative to the limitless needs and wants of people and businesses operating in the economy. That’s why it is important to use these resources efficiently in order to maximize the output that can be produced from them.

3. What economic resources are called the factors of production?

The economic resources that go into the creation of valuable products desired by consumers are also called the factors of production.

4. What factors of production do most economists distinguish?

Traditionally, most economists distinguish three factors of production: land, labour, and capital.

5. Why is entrepreneurship often considered as an additional factor of production?

A fourth item, entrepreneurship, is often considered as an additional factor of production because individuals are responsible for creating businesses and allocating economic resources in the business environment.

6.What does “land” as a factor of production comprise?

Land is the economic resource comprising natural resources, the things provided by nature, such as soil, timber, fisheries, minerals and other similar items.

7. Why are most natural resources in limited supply?

Since land is in limited supply it is a fixed economic resource. The only free unlimited land resource is the air you breathe: everything else is scarce since there is not enough to satisfy everyone’s demands.

8. What is rent?

Rent: return paid to those who supply the factor of production known as land. Those who own or control natural resources get a rent, the price paid for the use of land. Who receives it?

9.What does “labour” as a factor of production represent?

Labour represents the human capital available to transform physical resources into consumer goods. Labour: the human efforts required to produce goods and services.

10. How do almost all individuals provide labour as a factor of production?

Almost all individuals are capable of providing labour as a factor of production by putting physical and/or mental efforts or, in other words, thousands of different abilities and skills, into the creation of goods and services.

11. What is called wages?

The price paid for the use of labour is called wages representing income to the workers, who own their labour Wages: the price paid for the use of labour. (To the economist, the term refers to the nation’s wealth paid to labour, as distinct from other forms of income – rent, interest, and profit).

. 12. Why is labour not of the same quality?

This factor of production is a flexible or active resource as a nation can shift this resource to different areas of the economy according to the needs of individual consumers in the economy.It should be noted that not all labour is of the same quality. Some workers are more productive than others because of increased natural skill, received education, training and experience.

13. Why are some categories of population not part of the labour force? The amount of labour depends ultimately on the population of the country and on the number of people who are available to work. Those in school and universities, those retired, too handicapped to work*, mothers who stay at home with their children are not part of the labour force.

14. How do economists define capital as a factor of production?

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 or pay workers for transforming assets into consumer products. Besides capital is the major physical (fixed) assets including buildings, production facilities, machinery, roads, vehicles, and other similar items which individuals have made to produce other goods and services. 15. What is interest?

Interest: payment for using someone else’s money; income derived from allowing someone else to use one’s money.

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. Payment for the use of someone else’s money, or capital, is called interest.

16. Why is entrepreneurship considered (as) the fourth factor of production? Entrepreneurship is considered a factor of production since someone must perform the managerial functions of gathering, allocating and distributing economic resources or consumer products to individuals and other businesses in the economy.

17. What is entrepreneurship? Entrepreneurship can be defined as the willingness of business owners to take risks of introducing new products and services to the market. It includes the managerial or organizational skills needed by most firms to initiate the process of production of goods and services. Entrepreneurship: the mana-gerial or organizational skills needed by most firms to produce goods and services at a profit.

18. Whom do we call an entrepreneur? . Entrepreneur: a person who creates a business in the hope of earning a profit; also a person, who organizes, manages and assumes the risk of a business enterprise.

Entrepreneurs are people who bring together the other three productive resources to make goods and services.

19. What reward do entrepreneurs receive for their risks, innovative ideas and efforts? The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business are profits.

20. Why is information considered to be the fifth factor of production? Today, information has become vitally important therefore it is identified by most economists as the fifth factor of production. Information means facts and figures about markets and competition that are often stored on computers and are accessible immediately. This is a computer era, and business cannot compete without information about markets, financial and other important business conditions.