2281 · 1.2
The factors of production
**Factors of production** (1.2) link **scarcity** (1.1) to the **rewards** each factor earns — rent, wages, interest and profit — and to the labour market (3.3). Distinguish **physical** from **financial** capital every time.
Need to know
What you need to know
- Factors of production are the resource inputs used to produce goods and services.
- They are categorised as Land, Labour, Capital, and Enterprise.
- The scarcity of these factors is the root cause of the basic economic problem.
- Each factor receives a specific reward or income for its contribution.
Explanation
The factors of production
- Factors of production are the resource inputs used to produce goods and services.
- They are categorised as Land, Labour, Capital, and Enterprise.
- The scarcity of these factors is the root cause of the basic economic problem.
- Each factor receives a specific reward or income for its contribution.