Question

Summary: of scarcity and the factors of production

Answer 1

Factors of Production (A.K.A. Economic Resources):

Separated into 4 distinct groups

1. Labor - Human skills, effort, knowledge, talent (both physical & mental). Can be augmented by education and training (human capital)
2. Land/Natural resources - e.g. land for crops, mineral deposits, oil/gas reserves, water
3. Physical Capital - Manmade equipment (e.g. machinery, buildings, roads, vehicles, computers)
4. Entrepreneurial Ability - Effort & know-how to put resources together in a venture

Scarcity

The aforementioned factors of production are limited in supply. The following examples involve the production of a term paper.

1. Labor - Hrs. of research & writing are scarce–limited to # of hrs. in a day

1. Land/Natural resources - e.g. paper (trees); trees are limited and so is ability to accquire them (b/c of income)
2. Physical Capital - e.g. computer, printer, desk, pens, workspace
3. Entrepreneurial Ability - Skill needed to compile research into academic work

Answer 2

Remember, goods and services are scarce because the factors of production used to produce them are scarce. In case you have forgotten, scarcity is described as limited quantities of resources to meet unlimited wants. Consider a pair of denim blue jeans. The denim is made of cotton, grown on the land.