Unit 1 Lesson 5

Factors of Production

Types of Societal Resources

Like individuals, societies cannot satisfy all their wants. All societies (in all countries) have limited resources. These resources are typically categorized into four groupings: land, labor, capital, and entrepreneurship.

• Labor is the human resource. • Labor refers to the mental and physical efforts

applied to the production of goods and services.

• Payments for labor services are called wages.

LAND

• Land is the environmental resource.• Land includes all natural resources, land

(including anything that grows on or below the land, water, air, and wildlife.

• Payments for the use of land are called rents.

An renewable resource is one that can be replaced, either naturally or by man. A nonrenewable resource is one that cannot be replaced in a timely manner or at all by nature or

by man.

Renewable Resources Nonrenewable Resources

Let’s Practice

CAPITAL

• Capital is the physical improvement resource.• Capital refers to all relatively permanent

improvements made to land.• Capital includes buildings, sidewalks, utilities that

are installed, and all the machinery and equipment that is used to make the improvements.

• Another type of capital is financial capital, which includes money, stocks, bonds, and deeds to land.

• Payment for all capital is called interest.

ENTREPRENEURSHIP

• Entrepreneurship is the risk-taking resource.• Entrepreneurs make things happen.• They are the people who combine labor, land,

and capital to start businesses.• However, not every business is successful.• As a matter of fact, more new businesses fail

than survive.• Payment for risk-taking or entrepreneurship is

called profit.

Name That ResourceLand

Capital

Capital

Land

Entrepreneur

Factors of Production Activity

Work with members of your group to design and create a collage that displays examples of the factors of production. You may use the chart below as a reference.

Land• Natural resources

Labor• Anyone who works and the work they do.

Capital• Property used to make other goods and services.

EntrepreneurshipIndividual’s ability to start new businesses and take risks with financial capital.

You may clip photograph, ads,

and articles or create artwork of

your own. You must not have any

white paper showing and each example should be

unique. Don’t forget the title and labels to identify

the factors of production.

ClosureObjectives• Identify the four factors of

production.– Land– Labor– Capital– Entrepreneurship

• Identify the difference between goods and services.– Goods are tangible objects

whereas services are activities performed by people.

Concepts• Land• Labor• Capital• Entrepreneurship • Goods• Services