Productive resources are the requirements for producing goods and services in an economy. Often economists call these ‘factors of production’. Usually these are represented as capital, labour and land. Entrepreneurship is increasingly included as a fourth factor.
Capital usually comprises fixed capital such as structures, buildings, physical plant, machinery and tools. Circulating capital is often described in terms of components and raw materials.
Labour includes all aspects of human resources and may be unskilled, semi-skilled or skilled.
Land comprises naturally occurring resources where supply is inherently fixed. These resources may be renewable or non renewable. Examples are geographic locations, mineral deposits, forests, fisheries, air quality, geostationary orbits and parts of the electromagnetic spectrum.
Entrepreneurship is often described as the capacity and willingness to develop, organise and manage a business venture along with any of its risks in order to make a profit. It is often closely associated with starting new businesses.
How we define what we use to supply goods and services is critical to our understanding of the economy. How can we test if the traditional capital-labour-land approach is still valid? How strong or significant is entrepreneurship in the mix?
This Micro Brief is part of an ongoing series provided as a general public information service. These concepts underpin modern economic analysis. Find out more about smarter capital investment decisions using economics at www.lyttonadvisory.com.au.