Factors of Production

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  • Created by: hannah
  • Created on: 17-09-14 15:41

Economic Resources:

C - Capital
– Enterprise
L - Land

– Labour

To produce goods and services requires resources. We call these the factor inputs available in the production process. Economic resources are scarce relative to the infinite needs and wants of people and businesses operating in the economy. It is important to use these resources efficiently in order to maximise the output that can be produced from them.

To an economist, capital has several meanings - including the finance raised to operate a business. But normally the term capital means investment in goods that can produce other goods in the future. Capital refers to the machines, roads, factories, schools and office blocks which human beings have produced in order to produce other goods and services. A modern industrialized economy possesses a large amount of capital, and it is continually increasing. Increases to the capital stock of a nation are called investment. Investment is important if the economy is to achieve economic growth in the long run. We also include the social capital created from Government investment spending, i.e. the building of new schools, universities, hospitals and spending on expanding the national road network. In the summer of 2000, Chancellor Gordon Brown announced large scale increases in government spending on education, health and transport. One reason behind this spending boost was the desire to increase the stock of social capital available to meet the needs of the economy in a changing world.



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