ECONOMIC RESOURCES
All economies need resources to produce goods and services to satisfy
the demands of its people. These resources are called factors of production
and four can be identified:
Land: natural resources found on or below the earth’s surface, eg coal,
fish, trees, copper. Land can be renewable, ie can be used and replaced, eg
fishing stocks, forests and wheat, or it can be non renewable, ie once used it
can never be replaced, eg oil, iron ore, silver.
Labour: the human effort needed to produce the output, ie the workforce of an
economy. The amount produced by the workforce will depend upon the numbers of
workers in the economy, and also the quality of them, ie how much education and
training they have received. We assume the more educated and trained, the better
they perform, ie their productivity increases.
Capital: manufactured goods that are used to produce other goods, eg machines,
lorries, computers. The quality of capital used by workers will also influence
their productivity.
Enterprise: the people who take risks by using their's or someone
else’s money to combine the other factors of production to produce the output
which will be bought by consumers. As a reward for risk taking they will receive
a profit if successful, but lose their money if they cannot sell the output.
Economic activity can be classified as to which sector of the economy it takes place in:
Primary sector: also called the extractive sector where natural resources are generated
Secondary sector: also called the manufacturing sector where output is produced
Tertiary sector: also called the service sector where output is sold to the consumer
Economic resources can be used to produce goods and services:
Goods can be classified as consumer goods which are used for immediate consumption, eg bread, or capital goods which are used to generate goods in the future, eg a factory lathe.
Services are also generated from economic resources which give intangible benefits to consumers, eg hairdressing and banking