#3.1 The Factors of Production

The basic economic problem arises because resources are unlimited while human wants are limited.

Factors of production refer to the resources used to produce goods and services in an economy.

Owners of the factors of production do not receive any payment for their resources.

Land as a factor of production includes natural resources such as minerals, water bodies, and climate.

The quality of land is unimportant in determining its productivity.

The reward for owning land is rent or income from extracted resources.

Labour refers to all human resources available in an economy for production.

A large population always guarantees a highly skilled workforce.

Cultural limitations can restrict labour participation in some economies.

Capital includes only natural resources used in production.

The reward for using capital in production is interest or profit.

Enterprise involves organising and managing the other factors of production to create goods and services.

Entrepreneurs take no risks when starting or managing a business.

Successful entrepreneurs need qualities such as leadership, innovation, and market awareness.

Physical capital includes human skills, knowledge, and experience.

The quantity and quality of physical capital play a crucial role in economic growth.

Specialisation involves individuals, firms, and economies focusing on producing specific goods and services.

Division of labour reduces productivity by making production processes more complex.

Entrepreneurs do not need to anticipate market needs for their businesses to succeed.

Entrepreneurs play a crucial role in organising resources and taking risks to meet market demands.