Factors of Production - Video Tutorials & Practice Problems
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Land, Labor, and Physical Capital
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we've been talking a lot about scarce resources to this point, but let's go ahead and define what those resources are. So factors of production which are resources, right? Usually I'm gonna call them resources but they can be called either one factors of production resources, right? Um They're broken up into a few categories. The first one here is land. And when I talk about land, I like to put land in these little quotation marks. Um Land is all natural resources that are used in the production process. Um So that's why I put those quotations because when you think land, you're probably just thinking about the actual land, right? Where we build a factory or something. So yes, it does include the actual land but it also includes other things such as forests, right? Other natural resources that are on the land like a lake to um But it also includes some stuff that's counterintuitive And you might not think of it at first stuff like wind, right? If we're harnessing the power of the wind that also falls into this land category. Another crazy one. Sunlight, right? If we're harnessing sunlight that also fits as land, it's a natural resource. Next let's talk about labor. So labor. This is the physical and mental contributions of the people in the production process, right? This is someone actually going to work and doing their job. So I don't know here's a good example. How about a tutor? I don't know where I came up with this. You know, they just comes to me right? The work of a tutor when you're in here making these videos, I am doing labor, right? I'm bringing labor is the factor I'm bringing to the table here. But it's really what anybody's doing. A baseball player going up and swinging the bat. He is doing his labor in the production process of a baseball game. Even, let's say a physicist, right? Or a fry cook anybody, anybody who's doing their job is providing labor to the production process. Put fry cook here as well. Let's move on to the next one here. Uh, Physical capital. So this is factories and equipment used in the production process. Um, and I like to think of this as improvements on land. So this is stuff that we build on top of land improvements on land. And I'm gonna put land in quotation mark again, right? Because this is that same land that includes all natural resources. So yes, if we build a factory uh on a piece of land, yes, that doesn't get included in physical capital. But what else gets included? Uh, I'm gonna get out of the way, uh is stuff like, let's say an oil well, right? If we have an oil deposit, we build a well on it, that's physical capital or even an irrigation ditch on a farm. Um that also fits into physical capital. We are improving the land uh for the production process. Cool. So let's move on to the next video and we'll go through the rest of these
2
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Human Capital and Entrepreneurship
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2m
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So let's go ahead and finish up these factors of production. The next one here is human capital. This one's a little more intangible and it represents the productivity of the labor force. So you can imagine that everyone's got a different productivity, right? And that depends on a few different things. Even countries can be more productive than other countries, Right? And this usually depends on levels of education. So the idea here is a higher level of education is going to increase your human capital, it's gonna make you more productive right in in in the production process. Or how about training, training as well is going to be something that's gonna increase your human capital? So we'll say that levels of education and training increase productivity, right? And that increases your human capital, the last one here, entrepreneurship, it's kind of another intangible kind of piece of human capital, right? And it's the resources that organize, manage and assemble the other factors of production. So you might be thinking how does how does this really fit in to the, to the equation, You know, entrepreneurs are the kind of people who bring, let's say innovation to the table, right? And if you think about, even in the last 100 years, it's not like we've gotten more resources in other ways, right? Like it's not like there's more land available or more physical capital in that sense, right? It's maybe we have more human capital, we are getting smarter, but a lot of what's happening is there's a lot of innovation happening and that's adding a lot to the production process, right? Innovation is a key here. Another key part of entrepreneurship is risk taking. They take the risks, uh, that allow the production process to expand as well. So the idea here is the entrepreneur is also an important part of the productive the production process, and entrepreneurship is considered a resource in the production process. Cool, So let's move on.
