Factors of Production.mp4

Factors of Production.mp4


for any business to operate, certain resources need to be accessible to the people who want to run this business. The name, in economic terms, of these resources is factors of production. Now let’s suppose we want to open up a coffee shop. So we’ve got this dream or this vision that we think this business will be successful. There’s a plot of land that’s available for sale that’s one thing that we need. One of the factors of production is an entrepreneur. A business will not get up and running without somebody with the idea. The entrepreneur – the person who’s willing to take the risk to try and make this work and do all the work that’s necessary The entrepreneur also needs to be able to access capital – money that is going to get used to buy the land, to build the structure itself, to advertise, to buy the materials, to get everything ready before the very first cup of coffee can ever get sold now, that capital ends up getting used to higher labor and to purchase the natural resources. Both of these are necessary in order for any business whatsoever to get up and running. Labor – the people that are going to work there at the coffee shop making and selling the coffee on a day-to-day basis. Natural resources – the land itself. The coffee shop will sit upon the materials that get used to make the glass in the windows, the bricks, the coffee beans, the water – everything that’s needed in order to allow this business to operate factors of production include: entrepreneurs, capital, labour, and natural resources. Any business that’s going to operate must have access to these four factors of production. If the business is able to access these four factors of production, it may be able to operate as a profitable business now, here’s what happens once the business is up and running. The entrepreneur’s offering a product for sale that he hopes customers, or buyers, are prepared to purchase. In our case it’s a cup of coffee. If all goes well, the customer exchanges money for that cup of coffee, the entrepreneur takes the money, the customer takes the cup of coffee, and everybody’s happy. Now, the entrepreneur does not get to keep all of the money that came into the business. Some of that money needs to go back to repay the bank in other words to repay the loan that was taken in order to acquire the capital to get the business up and running in the first place. Some of that money goes to pay for the labor – the people that did the work day-to-day in order to satisfy the needs of the customers and some of the money needs to go to suppliers hopefully something’s left and a little bit of profits remaining and the entrepreneur takes a little bit of money for their risk and effort. Factors of production: for a coffee shop to exist – for any business to exist – there needs to be entrepreneurs who are willing to take the risks and invest their time and energy and money into getting that business open. There needs to be access to capital to pay for the start-up costs and all the other things that are required to get that business up and running before we actually sell our first cup of coffee or whatever else our product is. We need to have access to labor people are going to do the work, and we need to have access to Natural Resources – the land that the business sits upon and all the materials that are used in order to generate the profit. These are called factors of production. They include entrepreneurs, capital, labor, and natural resources

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11 thoughts on “Factors of Production.mp4”

  • You show capital as money, but isn't that wrong? Capital in Economics are human made goods, which are used to produce other goods right?

  • @Philipwestra

    You're right. Here's why I chose to define it more specifically to "money". The video was made for intro to business, so to keep it simple I'm using the definition below:
    "Capital market refers to a market where the financial institutions mobilize the savings of the people and lend them for long term, period for raising new capital in country. Capital Market, in other words, refers to the long term borrowing and lending of capital funds."

  • There are only THREE factors of production
    LAND – land and all resources, inc water, air, oars, etc;
    CAPITAL – the result is profit;
    LABOR – the result is wages;

    "entrepreneur" is not a factor. Look at Adam Smith & David Ricardo.

  • An easier approach on the capital question might be that while human made goods are capital resources, they are most commonly purchased with money rather than built from scratch. In the case of the coffee shop, the furnishings, equipment and other material supplies (capital resources) used to produce the good or service were purchased rather than being produced on-site using the labor resources and natural resources.

  • baha asemakinov says:

    could you pls tell me How does is cost change in response to changes in prices of factors of production?

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