3 Basic Economic Questions

• What will be produced?
• How will it be produced?
• For whom is it produced?

The 4 Factors of Production

The Four Factors of Production

Entrepreneurship

Capital

Labor

Land

• Producing goods and services requires the use of resources.
• ALL resources can be fit into one of the following four factors of production:

The Four Factors of Production

Land = All natural resources that are used to produce goods and services. Anything that comes from “mother nature.” (Water, Sun, Plants, Oil, Trees, Stone, Animals, etc.)

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Labor = Any effort a person devotes to a task for which that person is paid. (manual laborers, lawyers, doctors, teachers, waiters, etc.)

The Four Factors of Production

Two Types of Capital:

1. Physical Capital- Any human-made resource that is used to create other goods and services (tools, tractors, machinery, buildings, factories, etc.)

2. Human Capital- Any skills or knowledge gained by a worker through education and experience (college degrees, vocational training, etc.)

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The Four Factors of Production

• Entrepreneurship= ambitious leaders that combine the other factors of production to create goods and services.
• Examples-Henry Ford, Bill Gates, Inventors, Store Owners, etc.

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Entrepreneurs:

• Take The Initiative
• Innovate
• Act as the Risk Bearers

So they can obtain _________.

Profit= Revenue - Costs

PROFIT

The Factors of Production

The Four Factors of Production

You decide to order a pizza to satisfy your wants. First, you picked up the telephone and gave your order to the owner that entered it into her computer. This information came up on the chief baker’s monitor in the kitchen and he assigned it to one of his cooks. The cook was busy mixing dough out of salt, flour, eggs, and milk.

The cook finished mixing dough, washed his hands in the sink, and prepared your pizza using tomato sauce, cheese, and sausage. He then placed the pizza in the oven. Within 10 minutes the pizza was cooked and placed in a cardboard box. The delivery person then grabbed your pizza, jumped in the company car, and delivered it to your door.

Classify the Factors of Production in the following scenario:

The Four Factors of Production

Classify the Factors of Production in the following scenario:

You decide to order a pizza. First, you picked up the telephone and gave your order to the owner that entered it into her computer. This information came up on the chief baker’s monitor in the kitchen and he assigned it to one of his cooks. The cook was busy mixing dough out of salt, flour, eggs, and milk.

The cook finished mixing dough, washed his hands in the sink, and prepared your pizza using tomato sauce, cheese, and sausage. He then placed the pizza in the oven. Within 10 minutes the pizza was cooked and placed in a cardboard box. The delivery person then grabbed your pizza, jumped in the company car, and delivered it to your door.

The Four Factors of Production

1.

2.

3 (3a/3b).

4.

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Assignment: Research and find an article about a business (from a valid news source!). Identify the following:

• Any/All Factors of production mentioned in the article
• Who owns the company?
• What do they produce/What is their purpose?
• What choices must they make?
• How do their choices affect them on the microeconomic level?
• How do their choices affect them on the macroeconomic level?
• What is most interesting about this article?

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1. Which of the following is an example of using physical capital to save time and money?

(a) hiring more workers to do a job

(b) building extra space in a factory to simplify production

(c) switching from oil to coal to make production cheaper

(d) lowering workers’ wages to increase profits

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Quick Quiz

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1. Which of the following is an example of using physical capital to save time and money?

(a) hiring more workers to do a job

(b) building extra space in a factory to simplify production

(c) switching from oil to coal to make production cheaper

(d) lowering workers’ wages to increase profits

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Quick Quiz