Submitted by: JONARD L.

BAGUIO

Subject: ED 241

REFLECTION PAPER

FACTORS THAT INFLUENCE THE ECONOMIC DEVELOPMENT OF A COUNTRY

Economic growth is the increase in the production of goods and services from one period

to the next. As such, the value of these goods and services increases, resulting in larger corporate

profits. It has a snowball effect, which often leads to higher stock prices and a rise in

employment. Companies have more capital to invest in new ventures and consumers are able to

spend more. As such, economic growth is one of the most-watched indicators, if not the most

important. Economists measure it in real terms, which factors in inflation, or in nominal terms.

Aggregate growth is commonly measured as a nation's gross national product (GNP) or gross

domestic product (GDP). Land, labor, capital, and entrepreneurship are the factors that

influence the economic growth of a country.

Land

When most people think of land, they automatically assume it means agricultural land.

While that's true, it isn't the only thing that makes up this factor. Land doesn't just refer to natural

resources, but it can also include commercial real estate and renewable resources like forests.

Producers also use natural resources that come from the earth, which also fit into this category.

These resources include:

 Oil and gas

 Coal
  Silver, copper, and other metals

 Other commodities

Land is generally considered one of the most important factors of production. Certain

industries rely on land more than others. For instance, a real estate developer needs it to make

good on its investments. But technology companies and those that rely on automation tend to

rely less on land, making it a less significant factor of production.

Labor

Labor consists of the people who are responsible for the creation of goods and services

(from beginning to end) and the effort they put forth. These individuals include factory workers,

managers, salespeople, and engineers who design the machinery used in production. As such, it

can take on many forms. For instance, the effort of construction workers who work on a building

site and quality control workers who ensure products are ready to go to market make up this

category.

Individuals are compensated for their time and effort, and the amount they are paid

depends on the skills they bring to the table. People with fewer skills and training tend to earn

lower wages while people who are educated and highly skilled get paid more.

Capital

Although most people think capital is cash, the term here actually describes a number of

other assets. Capital goods are also considered capital, which includes manufacturing plants,

machinery, tools, or any equipment used in the production process. Capital may also refer to a

fleet of trucks or forklifts as well as heavy machinery.

When the economy is flourishing and expands, corporations are able to access capital so

they can spend and make investments and continue making profits. During times of economic
contraction, though, they must cut costs to preserve capital to ensure they are still profitable. All

of this is necessary in order to ensure that they can continue bringing new products and services

to market.

Entrepreneurship

Entrepreneurship is the fourth factor and includes the visionaries and innovators behind

the entire production process. The entrepreneurs combine all the other factors of production to

conceptualize, create, and produce the product or service. They are the drivers behind any

technical change in the economic system which has been shown to be a major source of

economic growth. Economists believe that entrepreneurship is one of the most integral parts of

the production process. That's because it uses all three of the other factors in the manufacturing

of goods and services.