1.

6 - Society's Economic Problem

Scarce Resources
Economic Resources

The land, labour, capital, and entrepreneurial ability that are used in the
production of goods and services

• Includes the entire set of factory and farm buildings and all the equipment, tools,
and machinery used to produced manufactures goods and agricultural products;

◦ All transportation and communication facilities;

◦ All types of labour;

◦ Land and mineral resources

Resource Categories
1. Land

Land

Natural resources used to produce goods and services

• Include forests, mineral and oil deposits, water resources, wind power,
sunlight and arable land
2. Labour

Labour

The physical and mental talents of individuals used in producing goods and
services
3. Capital

Capital/Capital Goods

Human-made resources (buildings, machinery and equipment) used to

produce goods and services

• Included are all factory, storage, transportation and distribution facilities, as

well as tools and machinery

Investment

Spending for the production and accumulation of capital

• Capital goods differ from consumer goods because consumer goods satisfy
wants directly, while capital goods do so indirectly by aiding the production
of consumer goods

• Capital refers to tools, machinery and other productive equipment

• Money/Financial Capital is simply a means of purchasing capital goods

4. Entrepreneurial Ability

Entrepreneurial Ability

The human talents that combine the other resources to produce a product,
make non-routine decisions, innovate and bear risks

Entrepreneurs

Individuals who provide entrepreneurial ability to firms by setting strategy,

advancing innovations and bearing the financial risk if their firms do poorly

• Takes the initiative in combining the resources of land, labour and capital to
produce a good/service

◦ The driving force behind production and the agent who combines the
other resources in what is hoped will be a successful business venture

• Makes the strategic business decisions that set the course of an enterprise

• Innovates → the entrepreneur commercializes new products/production

techniques/forms of business organization

• Bears risk

◦ Innovation is risky as all new products and ideas can fail

◦ Progress would cease without entrepreneurs who are willing to take on

risk by devoting their time, effort and ability - as well as their own money
and the money of others - to commercializing new products and ideas
that may raise society's standard of living
Factors of Productions/Inputs

Economic resources: land, labour, capital, and entrepreneurial ability