UNIT FOUR

Factors of Production

ESSENTIAL VOCABULARY

1. Condition n – a favourable or unfavourable state of something – умова, стан.

Business conditions – ділова/господарська кон’юнктура, financial conditions –
фінансовий стан/фінансові умови, market condition(s) – ринкова кон'юнктура.
2. Effort n – an expense of strength and energy to achieve a desired end – зусилля,
намагання. To make an effort – докласти зусилля, намагатися, to put an effort
in/into something – вкладати зусилля. Syn. an attempt.
3. Failure n – a lack of success – невдача, банкрутство, провал. Business failure
– банкрутство підприємства.
4. Income n – money of all kinds received by a person or organization in a year from
work, investment, rent, etc. – прибуток, дохід. Syn. a profit, a return.
5. Input n – a resource required by a firm to enable it to produce goods and services
– запроваджений фактор виробництва. Human input – людські затрати.
6. Means n – something that enables a purpose to be fulfilled – засоби. Means of
production – all goods that are made with the purpose of using them to produce
other goods – засоби виробництва. Syn. capital goods.
7. Own v – to have as property – володіти. Syn. to have, to possess.
8. Payment n – the sum of money paid – платіж, сплата. To make payment –
здійснювати платіж. Syn. a pay.
9. Raise v – to increase the amount, size, value – підвищувати, збільшувати. To
raise money/funds/capital – добувати (отримувати) гроші (капітал). Syn. to go
up, to increase.
10. Risk n – a chance or possibility of suffering loss, danger, injury, etc – ризик. At
one's own risk – на свій страх та ризик To assume/take/a/the risk(s), to risk –
ризикувати, наражатися на ризик. Syn. a hazard.
11. Reward n – something given or received for service, effort, or achievement –
винагорода. Syn. a compensation.

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Text
Economic resources are scarce relative to the limitless needs and wants of people and
businesses operating in the economy. It is important to use these resources efficiently
in order to maximize the output that can be produced from them.
They are combined in various ways to produce goods and services. Since these
resources go into the creation of goods and services, they are called the factors of
production. Each factor of production has a place in the national economy, and each
has a particular function.
Traditionally, economists have noted four factors of production: land, labour, capital,
and entrepreneurship.
 Land or natural resources are the things provided by nature such as soil and
minerals that are used in the creation of products. The price paid for the use of
land is called rent.
Some nations are rich in natural resources and develop this by specializing in the
extraction and production of these resources, for example, the development of the
North Sea oil and gas*.
Air, sunshine, rainfall are classified as free goods since consumption by one person
does not reduce their availability for others – free goods do not have an opportunity
cost. One major resource is for the most part free – the air we breathe. The rest are
scarce, because there aren’t enough natural resources in the world to satisfy the
demands of consumers and producers.
Labour is the human input into the production process. Economists distinguish
between the physical and mental efforts that people put into the creation of
goods and services. The price paid for the use of labor is called wages. Wages
represent income to workers, who own their labour*.
Not all labour is of the same quality. Some workers are more productive than others
because of the education, training and experience they have received. The amount of
labour will depend ultimately on the population of the country (or the world, if people
can immigrate), and on the number of people who are available to work. Those in
school, those retired, too handicapped to work*, mothers who stay at home with
their children are not part of the labour force.
 Capital goods or capital as it is commonly called are man-made goods (or
means of production) which are used in the production process. Capital or
physical capital refers to the machinery, tools*, roads, factories, and buildings

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 which individuals have produced in order to produce other goods and services. A
modern industrialized economy possesses a large amount of capital, and it is
continually increasing. Increases to the capital stock* of a nation are called
investment. Investment is important for the economy to achieve its economic
growth.
To an economist, capital has another meaning. It is the finance raised to operate a
business whereas business people refer capital to money they can use to buy
factories, machinery and other similar productive resources. Payment for the use of
someone else’s money, or capital, is called interest.
So, economists distinguish between physical and financial capital.
 Entrepreneurship is the willingness of business owners to take risks of
introducing new products and services to the market. It is the managerial or
organizational skills needed by most firms to produce goods and services.
Because of its essential role in initiating the process of production,
entrepreneurship is determined by some economists as a "fourth factor of
production," along with land, labour and capital. Entrepreneurs are people who
bring together the other three productive resources to make goods and services.
The success or failure of a business often depends on the quality of
entrepreneurship.
The reward to entrepreneurs for the risks, innovative ideas and efforts that they have
put into the business are profits, whatever remains after the all production costs have
been met, in other words, entrepreneurs make their payments to the owners of land,
labor and capital.
 Today, information is identified by economists as the fifth factor of
production because it has become vitally important nowadays. Information
means facts and figures about markets and competition that are often stored
on computers and are accessible immediately. This is a computer age, and
business cannot compete without information about markets, financial and
other important business conditions.

COMMENTS
the development of the North Sea oil and gas – розробка покладів нафти та
газу в Північному морі;
who own their labour – хто володіє своєю робочою силою;

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too handicapped to work – ті, хто мають занадто великі фізичні або розумові
вади, щоб працювати; ті, хто не можуть працювати через занадто великі
фізичні або розумові вади;
tools – знаряддя (праці);
the capital stock – основний капітал/основні виробничі фонди.

Exercise 1. Read, translate into Ukrainian in written form and learn by heart the
definitions of the following economic terms and concepts.
1. Capital: something created to _____________________________________
produce other goods and services;
also money used to pay for the
operation of a business.
2. Entrepreneur: a person who
creates a business in the hope of
earning a profit; also a person, who
organizes, manages and assumes the
risk of a business enterprise.
3. Entrepreneurship: the mana-
gerial or organizational skills needed
by most firms to produce goods and
services at a profit.
4. Factors of production: the
productive resources of land, labour,
capital and entrepreneurship that go
into the production process.
5. Information: facts or details that
tell something about the person,
situation, event etc.
6. Interest: payment for using
someone else’s money; income
derived from allowing someone else
to use one’s money.
7. Investment: the use of money to
get a profit or to advance in business
activity.
8. Labour: the human efforts
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required to produce goods and
services.
9. Land: the gift of nature in the
form of useful materials of all kinds
in or on the earth, including surface
space, soil, rocks, minerals, water,
wind and weather.
10. Rent: return paid to those who
supply the factor of production
known as land.
11. Wages: the price paid for the use
of labour. (To the economist, the
term refers to the nation’s wealth
paid to labour, as distinct from other
forms of income – rent, interest, and
profit).
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Exercise 2. Give the Ukrainian equivalents for the following.

1. the limitless needs and wants __________________________________________
2. the national economy ________________________________________________
3. the extraction and production __________________________________________
4. air, sunshine, rainfall are classified _____________________________________
5. to distinguish between the physical and mental efforts ______________________
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6. the amount of labour _________________________________________________
7. man-made goods ____________________________________________________
8. a large amount of capital _____________________________________________
9. to achieve economic growth __________________________________________
10. the willingness of business owners _____________________________________
11. its essential role ____________________________________________________
12. to bring together ____________________________________________________
13. to become vitally important ___________________________________________
14. facts and figures ____________________________________________________
15. business cannot compete without _______________________________________

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Exercise 3. Find the English equivalents for the following.
1. створення товарів та послуг _________________________________________
2. певна функція _____________________________________________________
3. речі, які надаються природою ________________________________________
4. решта – рідкісні ___________________________________________________
5. вільний товар _____________________________________________________
6. такої ж якості _____________________________________________________
7. освіта, підготовка та досвід __________________________________________
8. ті, хто на пенсії (за віком) ___________________________________________
9. засоби виробництва ________________________________________________
10. сучасна промислово розвинена економіка ______________________________
11. на думку економістів _______________________________________________
12. схожі виробничі ресурси ____________________________________________
13. управлінські або організаційні уміння _________________________________
14. бути доступним ____________________________________________________

Exercise 4. Match the verbs/verbal phrases, prepositions (if necessary) and noun
phrases as they occur together in the text. Translate the expressions they make into
Ukrainian.
1. to maximize the creation
2. to go between other productive resources
3. to be rich to a business
4. to distinguish into the population
5. to depend the business
6. to refer the output
7. to operate in the machinery
8. to bring together on the physical and mental efforts
9. to put natural resources

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Exercise 5. Match these nouns/noun phrases, prepositions (if necessary) and
nouns/noun phrases as they occur together in the text. Translate the expressions
they make into Ukrainian.
1. the amount entrepreneurs
2. production about owners
3. the reward a business
4. information of labour
5. the owners land
6. the failure to markets
7. business process

Exercise 6. Copy out from the texts the sentences containing the following words
and word- combinations and translate them into Ukrainian.
Nations are rich in: ___________________________________________________
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who are available to work: _______________________________________________
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individuals: __________________________________________________________

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similar productive resources: ____________________________________________
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is determined by: ______________________________________________________
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financial conditions: ___________________________________________________
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Exercise 7. Choose words and word-combinations having the same or similar

meaning to the words listed below. More than one is possible.
1. винагорода (2)
2. виробляти (3)
3. володіти (3)
4. засоби виробництва (4)
5. збільшувати (3)
6. зусилля (2)
7. необмежений (2)
8. платіж (2)
9. прибуток (3)
10. ризик (2)
11. ризикувати (3)
12. фактор виробництва (2)
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 a payment an input to own a profit a factor of production
man-made goods an income limitless to risk means of production
a compensation a risk to go up to make capital goods
to assume a risk capital to produce a hazard unlimited
to take the risk a reward a pay to have an attempt
to create to possess an effort to increase to raise a return

Exercise 8. Translate the words in brackets into Ukrainian.

Scarcity means that (жодне суспільство) has enough resources to produce all the
goods and services necessary (для того щоб задовольнити усі людські бажання).
Resources (які використовуються підприємствами як запроваджені фактори
виробництва) as inputs to produce goods and services (називаються) factors of
production.
Economists make a distinction between four basic factors of production: (земля,
праця, капітал та підприємництво).
(Земля) is the physical space on which production takes place, as well as the
(природні ресурси) found under it or on it.
(Праця) is the time (люди) spend (виробляючи товари та послуги). (Праця як
економічний термін) is considered (з точки зору кількості) – the number of
workers (та якості) – the skills and abilities these workers (мають).
It is common, (в економіці), to understand (працю як фізичні та розумові зусилля)
needed to (задовольнити людські потреби).
(Засоби виробництва) are final goods that are produced for use in the production of
other goods. Capital includes the physical plants, (машинне обладнання та
устаткування) used in (процесі виробництва).
(Підприємництво) is (поєднання виробничих ресурсів) to produce new or
improved products. The (підприємці), motivated by (доходами), can (ризикувати)
of business activities to produce goods combining the above resources.
(Інформація) is the fifth large (фактор виробництва), as (важливий) as (земля,
праця та капітал). The wide-scale use of (інформації) and communication
technology in industry not only leads to (збільшення у продуктивності) but also to
the (створення нової продукції) and new markets.

Exercise 9. Pair the halves of the sentences. Write your own list of the completed
sentences and translate them into Ukrainian.
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1. The factors of production include a. through investments in education,
training, and health.
2. To the economist, physical capital is b. entrepreneurs earn profits.
3. To some economists entrepreneurs are c. they can be put into production
process.
4. A factory, tools, machinery and trucks are d. there is enough for everyone to
capital goods because have as much as they want.
5. When the other three factors of production, e. something created by people to
land, labour and capital combined produce other goods and services.
successfully,
6. The term “capital” is often used by busi- f. to buy means of production and
ness people to refer to money they can use other similar productive resources.
7. An economy uses its existing limitless g. a special form of labour input.
resources
8. The quality of labour resources can be h. natural resources, human resources
improved capital and entrepreneurship.
9. Since free goods are so abundant in nature i. to combine inputs to produce
that goods and services.

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Exercise 10. What economic terms given in the text do the following definitions refer
to?
A B
1. a. goods which are needed but are in abundant supply and
therefore don’t need to be purchased.
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2. b. A factor of production that includes land itself as well as
mineral deposits, timber, water, and other natural resources.
3. c. Anything that is produced by the economic system which is
used as an input in the production of future goods and services.
4. d. The difference between the price received and the amounts paid
as rewards to the factors of production.
5. e. Return to those who supply the factor of production known as
“land”.
6. f. Productive resources needed to produce economic goods.
7. g. A person who brings together the factors of production and runs
a business at his own financial risk.
8. h. The money earned by a person from work, property, or
investment, regularly or over a specified time.
9. i. Payment to those owners of resources who supply the factor of
production known as “labour”.
10. j. A factor of production that is defined as the function performed
by those who bring together the other factors of production.
11. k. facts or data, pertaining to a particular subject or regarded as
significant.
12. l. A factor of production that represents those hired workers
whose human efforts and activities are directed toward
production.
13. m. a sum of money to be used in such a way that a profit or
increase in capital may be expected.
14. n. The money earned by a person as a reward for allowing
somebody to use his money and for waiting for the repayment
of the loan.

Exercise 11. Translate the sentences into English using the active vocabulary.
1. Причина, через яку люди не _____________________________________
можуть задовольнити усі свої _____________________________________
бажання та потреби, – це нестача _____________________________________
виробничих ресурсів. _____________________________________
2. Фактори виробництва – це _____________________________________
ресурси суспільства, які викорис- _____________________________________
товуються в процесі виробництва. _____________________________________
3. Фактори виробництва розподі- _____________________________________
ляються на три основні групи – _____________________________________
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земля, праця, капітал, які
об’єднуються четвертим фактором
виробництва, що називається
підприємництвом.
4. Економічний термін “праця”
означає людські ресурси або,
іншими словами, це – люди з усіма
їх зусиллями та здібностями.
5. Кількість робочої сили залежить
від загальної кількості населення
країни та кількості людей, здатних
працювати.
6. Підприємництво – це готовність
власників підприємств ризикувати
для того, щоб отримати прибуток.
7. Різниця між фізичним капіталом
і фінансовим капіталом полягає в
тому, що фізичний капітал – це
фактор виробництва, а саме, речі,
які створені людиною, щоб
виробляти інші товари та послуги,
а фінансовий капітал – це гроші,
які використовуються, щоб
купувати засоби виробництва.
8. Виробництво має місце і товари
виробляються, коли підприємці
об’єднують інші три фактори
виробництва.
9. На думку сучасних еконо-містів,
інформація – це п’ятий фактор
виробництва.
10.Інформація надає можливість
підприємцям приймати кращі
ділові рішення і успішно
конкурувати на ринку.
11.Власники землі, праці та
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капіталу отримують свої доходи у _____________________________________
формі ренти, заробітної плати та _____________________________________
відсотку відповідно. _____________________________________

Exercise 12. Answer the following questions.

1. Why is it important for a society to use economic resources efficiently?
2. What resources are called the factors of production?
3. What are the factors of production?
4. What is “land” as a factor of production?
5. What are natural resources?
6. What is rent? Who receives it?
7. Why are some goods classified as free ones?
8. What is labour?
9. What efforts do people put into the production of goods and services?
10.What price is called wage?
11.Why is labour not of the same quality?
12.What is the third factor of production?
13.What does capital refer to as a factor of production?
14.What kinds of capital do you know?
15.What is the difference between physical capital and financial capital?
16.What is interest?
17.How do economists and entrepreneurs consider financial capital?
18.What is entrepreneurship?
19.Who brings together the other three factors of production?
20.Whom do we call an entrepreneur?
21.What reward do entrepreneurs receive for their risks involved?
22.Why is information considered to be the fifth factor of production?
23.What kinds of payment are made for the use of the factors of production?

Questions for economic reasoning and discussion

Is there such thing as “human capital”? Are scientists, engineers, teachers, doctors,
lawyers, and skilled workers, for example, part of society’s capital? What criteria
would you use when deciding whether something is qualified as capital?
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3. Choose the right variant. Only one is possible.

1. Which of the following is not a productive resource?
a. Land
b. Labour
c. Money
d. Capital
2. Which of the following provides the most complete description or list of resources
from an economic point of view?
a. Land, labour, capital, and entrepreneurship.
b. Utility, economics, knowledge, and scarcity.
c. Canned goods, refrigerators, television sets, and shoes.
3. Factors of production are
a. the inputs into the production process.
b. weather, social, and political conditions that affect production.
c. the physical relationships between economic inputs and outputs.
d. all of the above.
e. none of the above.
4. All of the following categories are factors of production except:
a. entrepreneurship.
b. capital.
c. land.
d. money.

5. Which economic feature often results from the use of the other three features?
a. Land
b. Labour
c. Profit
d. Capital

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6. Land, labour, capital and entrepreneurship are
a. scarce.
b. goods.
c. resources.
d. all of the above.

7. What is the concept of a natural resource?

a. The stock of skills, talents and experiences of all the people in a society.
b. The stock or aggregate of physical and monetary resources in a society.
c. The stock or totality of resources that are found in a natural state in the soil,
oceans, rivers, lakes, forests, air that are not created by man.
d. (a) and (c) only.

8. Which of the following pairs represent human resources?

a. Land and water
b. Petroleum and jazz musicians
c. Mathematicians and pilots
d. Machinery and loans

9. When economists are discussing the factors of production and use the term labour,
they are
a. referring only to unskilled labour.
b. referring to everything that is NOT in the land category.
c. referring to both skilled and unskilled labour.
10. Which of the following describes a capital input?
a. A person's skills and abilities that can be deployed to produce valuable goods
and services.
b. Factories and offices where goods and services are produced.
c. Old-growth forests and marine capture fisheries.
d. Organizing production and accepting risk.
e. Both (a) and (d) above.
11. What is entrepreneurship?
a. The particular talent that some people have for organizing the resources of
land, labour, and capital to produce goods, seek new business opportunities, and
develop new ways of doing things.
b. The physical and mental talents people contribute to the production process.

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c. Produced goods that can be used as inputs for further production.
d. Natural resources such as minerals, forests, water, and fisheries.

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