- Identify the four factors of production
- Distinguish between the four factors of production
Factors of Production
All businesses, both for-profit and nonprofit, need resources in order to operate and produce something to sell.
inputs and outputs
Resources are the inputs used to produce outputs (goods and/or services). Inputs for a restaurant include the labor of the employees, the cooking equipment in the kitchen, and the ingredients for the food on the menu. A restaurant’s outputs include food and serving customers.
A resource needs to be productive. A resource is productive because it can be used to create something else. Resources are also called factors of production.
factors of production
There are four categories of resources, or factors of production:
- Natural resources (land)
- Labor (human capital)
- Capital (machinery, factories, equipment)
- Entrepreneurship (somebody who recognizes a profit opportunity)