Transforming Resources Into Goods and Services

Resources (inputs)

Resources: the elements that go into producing goods and services.

The Factors of Production:

Land- incorporates all the natural resources that can used for production. Clearly, land in the traditional sense is included. However as a factor of production, 'land' also includes natural and mineral resources such as coal, oil and gravel, and livestock such as sheep, pigs and cows.

Labour- describes both the physical and mental effort involved in production. It therefore ranges from people providing personal and commercial services, such as accountants and window cleaners, to those providing manual effort in producing finished goods, extracting raw materials or harvesting crops.

Capital- this means goods that are made in order to produce other goods and services. E.g. machinery, computer systems, shelving, lorries, forklift trucks, factories, shops and office blocks.

Enterprise- the act of bringing together the other factors of production in order to create goods and services. Enterprise is carried out by the entrepreneir, who makes decisions and provides the finance. The entrepreneir takes the financial risk and therefore earns the profit that can be made from converting inputs into outputs.

Improving Efficiency of the Factors of Production

- Improving the fertility of the land- modern agricultural techniques enable farmers to achieve greater output per acre.

- Using renewable or recyclable resources- many factories are now designed to minimise waste and improve energy efficiency so that resources are used more effectively.

- Greater education and training of the workforce- this can lead…