Factors of Product

ion
 HOW ARE GOODS PRODUCED?

Factors of production
The productive resources used to produce g
oods and services.
Factors of production are grouped into four
categories:
• Land (Natural Resources)
• Labor (Human Resources)
• Capital
• Entrepreneurship
 HOW ARE GOODS PRODUCED?

Land
o What Raw materials are needed to produce your product?

o The “gifts of nature” that we use to produce goods and servic

es. All the things we call natural resources.
o Comes from the air, water, or the earth
o Land, minerals, water
•Renewable SOURCES
oWater, air growing things
•Non-Renewable SOURCES
oCoal, oil
Factor 1: Natural Resources
• Nature supplies raw materials necessar
y to make things
• These raw materials are called Natural
Resources
– Example: Chicken noodle
soup contains chicken m
eat, spices, water, and ve
getables, all of which cam
e from the nature
 HOW ARE GOODS PRODUCED?

Labor
• What will your employees have to do to create your
product?
• What work will need to be done to turn your raw ma
terial into your finished product
o Work time and work effort that people devote to
producing goods and services
• People’s efforts, labor
• Effort can be physical or mental
Factor 2: Human Labor
• Human effort used to produce goods an
d services is called labor
• Labor can be physical or mental
•Example: to the soup, farmers raise the
animals and crops, a truck driver drives t
hem to a factory, and workers operate m
achinery to mix and can it (physi
cal labor)

•Someone has to design the machines,

and think of a recipe for the soup (menta
l labor)
 HOW ARE GOODS PRODUCED?
o Capital
o equipment and people will you need to crea
te your product
o Physical capital: What tools, machines and factories will yo
u needed to create your product
o Financial capital: funds the firm use to buy physical capital
o Human capital: What knowledge, skills, education and exp
erience will your employees need to have in order to prod
uce your product (for example: a seamstress , a chemist, a
computer technician )
• Goods made by people and used to produce other goods and servic
es
• Tools, instruments, machines, buildings, and other constructions that h
ave been produced in the past and that businesses now use to produ
ce goods and services.
Factor 3: Capital Resources
• Producing goods and services requires t
ools and equipment
• The buildings, machines, supplies, etc. u
sed to produce are called capital resou
rces, or capital goods

•Examples: the truck used

to drive to the factory, the
machines used to can the
soup, and the factory buildi
ng itself
HOW ARE GOODS PRODUCED?
oEntrepreneurship
o The human resource (PEOPLE) that organized and co
mbines labor, land, capital.
• The quantity and quality of entrepreneurship is har
d to describe and measure.
• But we can easily recognize brilliant entrepreneurs
by their enormous financial success.
o Sam Walton (Wal-Mart), Bill Gates (Microsoft), and Mi
chael Dell (Dell Computers) are examples of outstand
ing entrepreneur's.
 Influences on Entrepreneurs
Decision Making
• To realize a profit, produce good/service at
a cost lower than the market price for the g
ood or service.
• Profit is the money left over from selling a go
od or service after the cost of buying produ
ctive resources have been paid.
o Minimize the use of scarce resource in productio
n
o Maximize the productivity of the factors used in p
roduction to keep cost as low as possible.
Entrepreneurship:
The 4 Factor
th

• Making the other 3 factors of production

into something useful often takes creati
vity and some risk
• Entrepreneurship is the factor of prod
uction that ties the others together
•Examples: Someone has t
o decide what to name the
soup, where to sell it, and h
ow much to charge
The End👏👏👏
Thank you for listening🔊🔊🔊🔊😘
Reporters
1.Manicar, Edwina P.
2.Aguilar, Allan D.
3.Mabulay, Marian L.