Hello, everyone, and welcome back to another post on the topic of economics on your favorite blog “ICCBizNews".
Alright, the topic for today is “Factors of Production”.
Let’s begin.
The process of production as we know it includes the manufacturing of products and services via the utilization of scarce resources.
Producers in the modern-day economy ought to trade their income earned from selling these goods and services in exchange for scarce resources to enable them to create more and better goods and services, which they could then trade for higher profit margins shortly.
Therefore, both parties, be it producers or consumers, must continue exchanging something they have for something others want to feed the economic cycles of boom and bust to create economic growth, prosperity, and development in any given country.
Scarce resources are also called "factors of production" because the process of production is in one way or another connected to to the consumption of these scarce resources that are needed as an input for the outcome of creating finished goods from them in the first place.
Scarce resources, scarce resources, what type of scarce resources are you talking about??
I am glad you asked.
Generally, four types of scarce resources are utilized in the process of production in any given economy in the world.
They are:
- Land and natural resources.
- Human Capital.
- Real Capital.
- Enterprise.
Now, let’s go through them in a little detail, shall we??
1). Land and natural resources: This includes the land mass utilized for agriculture and mining of resources contained within the land, such as metals, minerals, and oil. It also includes the Environment I.E. the air, sea, rivers, forests, etc.
2). Human Capital: This includes the valuable skills and tools possessed by individuals a.k.a. “Labour” within an economy to boost productivity and efficiency whilst contributing towards the targets of economic growth and development.
3). Real Capital: This includes all man-made assets like machinery and equipment that have been built to boost the development, deployment, and delivery of goods and services in line with the demands of consumers on the land within any given nation. It also includes a hefty stock of raw materials sitting in the warehouse waiting to be consumed in the production of future goods and services. F.Y.I. the process of “Capital Creation” is called investment.
4). Enterprise: Enterprise a.k.a. the lifeline of every economy to create jobs, goods and services to be consumed, etc., is supplied by the entrepreneur who tends to willingly play two vital roles.
They are:
1). Playing around with the configuration and calibration of several factors of production in such a way that goods and services can be produced in the most efficient way to maximize the GDP and boost economic growth and development within the nation.
2). Taking calculated risks associated with the potential loss of assets and/or making commercial losses leading to diminished and staggering levels of job losses and GDP growth.
Mind-boggling, right??
Alright, that is the end of this post, everyone. Do comment and share your opinions in the comment section below.
We shall try and read them and respond to them as soon as possible.
Goodbye for now and see you tomorrow when we shall tuck into the topic of “Types of Production”.
Chao.
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