August 25 of 2010
Factors of Production
Economists have long recognized the three distinct factors that people use to create the things they want. Land, labor, andcapital are referred to as "factors of production. Each factor is plays a unique role in the production of goods, and each factor is clearly distinguishable from the other two.
* Land: Land isdefined as everything in the universe that is not created by human beings. It includes more than the mere surface of the earth. Air, sunlight, forests, earth, water and minerals are all classified as land,as are all manner of natural forces or opportunities that are not created by people. Labor uses capital on land to produce wealth. Every tangible good is made up of the raw materials that come fromnature and because all people (and other living things) have material needs for survival, everyone must have access to some land in order to live.
It includes space on the ground, hills, seas, oceans,air etc
* Labor: Land is the passive factor in production. As such, land simply exists. To make the gifts of nature satisfy our needs and desires, human beings must do something with the naturalresources; they must exert themselves, and this human exertion in production is called labor. Everything that people do, to convert natural opportunities into human satisfactions whether it involvesthe exertion of brawn, or brains, or both is labor, to the economist.
It includes machines, computers, tools, factories, roads etc.
* Capital: When the stuff of nature is worked up by labor intotangible goods, which satisfy human desires and have exchange value, we call those goods Wealth. (When labor satisfies desires directly, without providing a material good, we call that "Services";thus, economists say that labor provides the economy with "goods and services".) When some of the wealth is used to produce more wealth, economists refer to it as Capital. A hammer, a screwdriver, and a...