Factors of Production
 
The factors of production are the resources necessary to make goods and services.  They are usually classified into three different groups:  land, labor, and capital.  Many experts also include a fourth factor, entrepreneurs.  A memory aid for the factors is C-E-L-L (capital, entrepreneur, land and labor).
 
Capital
    Physical capital
    Physical capital includes any human-made resource that is used to produce other goods and services.  This includes the equipment, tools, machinery, new technology, factories and buildings.
 
    Human capital
Human capital is the knowledge and skills a worker gains through education and experience.  A college degree, training, on-the-job experience are all examples of human capital.
 
   Liquid capital
Liquid capital is cash or money that can be used to purchase the other needed factors of production.
 
Entrepreneurs
Entrepreneurs are people who organize land, labor, and capital to make goods and services.  A business often succeeds or fails relative to the ability of the entrepreneur in charge.  This individual assumes risk for the business.  This person is often paid for his or her efforts.
 
Land
Land includes all natural resources, minerals and other raw materials.  In other words, land consists of all “gifts of nature,” including mineral deposits, water, arable land (land that can be cultivated), vegetation, natural forests, marine resources, other animal life, and the atmosphere.  These resources all tend to be scarce.
 
Labor
Labor is the effort that a person devotes to a task for which that person is paid.
 
 
 
Activity #1:
At the top of a piece of paper, make four headings:  Capital, Entrepreneur, Land, and Labor.
Place these items under the correct heading:
 
Delivery Truck    
Teacher
Bill Gates
Factory
Tree
ATM machine    Bushel of corn
River
Hair stylist
Gold
Henry Ford
Barrel of oil Doctor
Store owner who opens a 10-store chain 
Bulldozer
Tractor
Farmer
Factory worker
 
 
Activity #2:
Choose one of the following entrepreneurs.  Read his or her story.  Then answer the following questions.
 
 
1.  What is this entrepreneur’s famous accomplishment?
 
2.  Identify the factors of production (land, labor, and capital) that this entrepreneur used.
 
3.  How was this person able to arrange the factors of production to make a successful business?
 
4.  What risks did this entrepreneur take?  What was his or her reward?
 
 
 
 
Student Assignment:
Read pp. 4-6 of your textbook
Define vocabulary terms #8-14
8.  Land
9.  Labor
10.  Capital
11.  Physical capital
12.  Human capital
13.  Liquid capital
14.  Entrepreneur