In the next three sections, we will take a closer look at the factors of production we use to produce the goods and services we consume. Natural resources are the resources of nature that can be used for the production of goods and services. Office buildings, machinery, and tools are examples of capital. Capital is a factor of production that has been produced for use in the production of other goods and services. People who are employed-or are available to be-are considered part of the labor available to the economy. Labor is the human effort that can be applied to the production of goods and services. The factors of production in an economy are its labor, capital, and natural resources. Ultimately, then, an economy’s factors of production create utility they serve the interests of people. The value, or satisfaction, that people derive from the goods and services they consume and the activities they pursue is called utility. Explain the role of technology and entrepreneurs in the utilization of the economy’s factors of production.Ĭhoices concerning what goods and services to produce are choices about an economy’s use of its factors of production, the resources available to it for the production of goods and services.
Define the three factors of production-labor, capital, and natural resources.
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