• I can define and differentiate the four
factors of production.
• I can give real-life examples of each factor.
• I can explain the importance of each factor
in the production of goods and services.
Production is the process of creating goods and
services by combining various resources to satisfy
human needs and wants.
Transforms inputs (resources) into
outputs (products or services).
There are 4 essential factors that make
production possible. Let’s explore them.
Key driver of
economic growth.
Land refers to all natural resources
used in producing goods and services.
Examples: Rice farms in the Philippines,
Gold mines in Davao, Water used in soft
drink production.
Without land, there is no place to grow,
extract, or build!
The Payment for Land is RENT
Forests and bodies of
water
Soil and
minerals
Sunshine and
climate
Types of Labor:
Labor includes all human effort (physical
and mental) used to produce goods and
services.
Specialization (division of labor) increases
efficiency and output - Adam Smith
Labor brings ideas, energy, and hands-on
work into every product.
The Payment for Labor is WAGES
Manual Labor
Skilled Labor
Physical Capital: Machines, tools, buildings
Capital increases productivity and
efficiency!
Payment for Capital: INTEREST
Financial Capital: Money invested in production
Entrepreneurs are people who bring
together the other three factors to
start and run businesses.
• Organize resources
• Take risks for profit
• Innovate products and processes
Entrepreneurs are the "captains" of production!
Payment for Entrepreneurs is PROFIT
Land
Farm, river, oil
Rent
Labor
Factor worker
Wages
Capital
Entrepreneur
Computer, sewing machine
Startup founder
Interest
Profit
Each factor plays a unique and essential role:
• Land gives us the resources
• Labor brings the effort
• Capital provides the tools
• Entrepreneurship leads the way
Together, they make life better by creating the goods
and services we need every day.
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