In turn, businesses pay households for these resources by providing them with income, such as wages, rent, and interest. For example, households provide businesses with labor (as workers), land and buildings (as landlords), and capital (as investors). Many of the factors of production are provided to businesses by households. The entrepreneurship skills and production knowledge used to coordinate the other resources to make the shirts and distribute them to the marketplace.The factory and equipment used in the manufacturing process, as well as the money needed to operate the factory.The land that the shirt factory sits on, the electricity used to run the plant, and the raw cotton from which the shirts are made.The factors of production used to produce a shirt would include the following: Entrepreneurship provides the skill, drive and creativity needed to bring the other resources together to produce a good or service to be sold to the marketplace.īecause a business uses resources to produce things, we also call these resources factors of production. Capital (equipment, buildings, vehicles, cash, and so forth) are needed for the production process. Labor transforms raw materials into goods and services. Land and natural resources provide the needed raw materials. Resources are combined to produce goods and services. Capital, including buildings and equipment.Resources may include any or all of the following: Resources are the inputs used to produce outputs. Resources: Inputs and OutputsĮconomics is the study of the production, distribution, and consumption of goods and services. We begin with a definition of economics and a discussion of the resources used to produce goods and services. To appreciate how a business functions, we need to know something about the economic environment in which it operates. Explain other key terms related to this chapter including supply, demand, equilibrium price, monopoly, recession, and depression.Discuss the concepts of inflation and deflation.Discuss the concept of the unemployment rate measurement.Explain the difference between fiscal and monetary policy.Discuss the concept of gross domestic product (GDP).Discuss private property rights and why they are key to economic development.Describe the foundational philosophies of capitalism and socialism.
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