..................................................................................................................................................................................Standard E1.2>

Define each of the productive resources (natural, human, capital) and explain why they are necessary for the production of goods and services.


Focus Question: What do people need in order to produce goods and services?


Map icon.pngClick here for a map of the World's resources by country.

Steve Jobs introducing the iPad, January 27, 2010
Steve Jobs introducing the iPad, January 27, 2010

Businesses need a combination of the factors of production. The four factors of production are land, labor, capital, and entrepreneurship.
  • Land is any natural resource.
    • Labor includes the efforts of workers.
      • Capital includes any man made goods used to produce other goods. Capital is sometimes divided into physical and human categories.
        • Physical capital includes things like factories, machines, tools, etc.
          • human capital includes knowledge and special skills related to job performance.
    • Entrepreneurship is the practice of combining the other factors of production to create goods and/or services.

In a capitalist or free market system, an entrepreneur is someone who recognizes profitable ways to organize land, labor and capital.

timber-plantations-forests_512.jpgFire-fighters.jpg

From feudalism to capitalism to socialism
From feudalism to capitalism to socialism

Karl Marx believed that economic systems would all eventually follow the same evolutionary trajectory.
  • Under feudalism and capitalism the means of the production are owned by a few wealthy elites.
    • Under socialism and communism, the means of production are seized by the people, theoretically creating a more equal system.

See World History II.7 for more on Karl Marx

Slavery was an economic system which much of the world has historically exploited. Under it, entrepreneurs (slave owners) own the land, the labor (people which they've enslaved), and the capital.

See World History I.20 for the development of the trans-Atlantic Slave Trade

In economics, there’s a popular theory referred to as “kicking away the ladder,” which refers to the idea that rich, powerful nations exploited questionable economic practices (slavery, environmental exploitation) in the past in order to make their way to their current level of power, but now these same countries seek to restrict smaller nation’s use of such practices.
  • Essentially, it means that weak nations can never possibly achieve the economic prosperity of their wealthier counterparts because the same means of wealth development are not available to them.

external image Red_apple.jpg As a way to critically examine success in business and in life, see "The Matthew Effect," a phenomenon discussed by Malcolm Gladwell in his book Outliers to show how success creates success as those experiencing success take advantage of perceptions that they should be successful.

lesson_plan_icon.jpgLesson Plan: The Productive Blues (Jeans)


lesson_plan_icon.jpgWork Sheet: Factors of Production

Overview of Productive Resources

Student-Written Example

A local, family-owned pizza parlor uses all four factors of production. They use tomatoes and flour, which count as land. They use cooks and delivery drivers which count as labor. They use ovens and cash registers that count as physical capital. When they train new employees who learn new skills they add to their human capital. And the owner counts as an entrepreneur because he organizes all of these resources to produce pizzas.

Standardized Test Items and Samples of Student Work.


1.) Which of these is not a factor of production?
a.) land
b.) money
c.) labor
d.) physical capital

2.) Taking an economics course in high school may increase the value of which factor of production?
a.) physical capital
b.) land
c.) human capital
d.) the stock market

Scroll down to the bottom of the page to check the answers.

Link to a Youtube video describing productive resources

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The following PowerPoint slides were created by a student as part of a unit assessment. They may not be perfect but are an example of how students can show that they have met the econ1-1Labor.jpgperformance criteria of the standard.
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econ1-1Entre.jpg


















Answers to Multiple Choice Assessment Questions: 1=B , 2=C

In economics, there’s a popular theory referred to as “kicking away the ladder,” which refers to the idea that rich, powerful nations exploited questionable economic practices (slavery, environmental exploitation) in the past in order to make their way to their current level of power, but now these same countries seek to restrict smaller nation’s use of such practices. Essentially, it means that weak nations can never possibly achieve the economic prosperity of their wealthier counterparts because the same means of wealth development are not available to them.