Choices concerning what goods and services to produce are choices about an economy’s use of its

factors of production. The value, or satisfaction, that people derive from the goods and services they
consume and the activities they pursue are called utility. Ultimately, then, economy’s factors of
production create utility and serve the interests of people.

The factors of production in an economy are its labour, capital, enterprise and natural resources. Labour
is the human effort that can be applied to the production of goods and services. Capital is a factor of
production that has been produced for use in the production of other goods and services. Office
buildings, machinery, and tools are examples of capital. Enterprise means the activities of profit-seeking
decision makers who determine which economic activities to undertake and how they should be
implemented. Natural resources are the resources of nature that can be used for the production of
goods and services.The fifth factor -information– is sometimes included as a factor of production in
modern economics. So, "Land" in economics means all natural resources and agents, with their sites
(locations and extensions in space). Land as site is permanent and recyclable, reusable and its supply is
fixed.

In order to produce the things we desire, a human resource must be used. It consists of the productive
contributions of labour made by individuals who work.

Labour is human effort that can be applied to production. It is a meaningful activity with the aim to
create goods and services. Revenue for labour is wage.

Demand for labour depends on wages, other resources of production, amount of capital, used
technology and labour supply depends on: wage in comparison to social benefits; population; average
number of working hours a year; quality and quantity of work.

Labour is the workforce of an economy and it is important to analyse labour in two ways:

1. The quantity of labour – obviously the numbers of workers is finite.

2. The quality of labour – note that some workers are more productive than others.

Forms of wages

Hourly rate is a reward for certain time of hour.

Piece rate is derived from the performance standards - how many pieces on average are made per hour.

Information as a factor of production is unlike any of the other factors in many important aspects.
Information is expansible, compressible, substitutional, transportable, diffusive, and shareable. In fact,
the same information can be sold or exchanged again.