Limited Resources

Posted by Abd. Ghafar Arif RM

In economic we categorize the resources available to us into four types. These are known as factors of production:

1.      Land

This is the natural resource. It includes the surface of the earth, lakes, rivers and forests. It also includes mineral deposits below the earth and the climate above.

2.      Labour

This is the human resources, the basic determinant of which is the nation's  to satisfy population. Not all of the population are available to work however, because some are above or below the working population age and some choose not to work.

3.      Capital goods

These are any man-made aids to production. In this category we would include a simple spade and a complex car assembly plant. Capital goods help land and labour produce more units of output. They improve the output from land and labour.

These three factors are organized into units of production by firms.

4.      Enterprise

This factor carries out two functions. Firstly, the factor enterprise organizes the other three factors of production. Secondly, enterprise involves taking the risk of production, which exists in a free enterprise economy. Some firms are small with few resources. The functions of enterprise are under taken by a single individual. In large, more complex firms the functions are divided, with salaried managers organizing the other factors and shareholders taking the risk.

Some economies have a large quantity of high-quality factors of production at their disposal. They can create lots of goods and services to satisfy the wants of their population. They are said to have a good factor endowment. Some economies lack sufficient quantities of one or more of the factors. Developing countries, for example, might have large quantities of land and labour but lack sufficient capital and enterprise. The former planned economies of Eastern Europe, such as Poland, have found it difficult to develop because they have few people with entrepreneurial experience.

Production and consumption

Resources are combined in the process of production to create goods and services. Goods and services have the capacity to satisfy wants. The process through which individuals use up goods and services to satisfy wants is known as consumption. Some goods, such as a chocolate bar, are quickly used up to satisfy our wants. Others satisfy wants over a longer period of time. These are called consumer durables. Examples of consumer durables include television sets, refrigerators and vehicles.

 
Source:

Colin Bamford, Keith Brunskill, Gordon Cain, Sue Grant, Stephen Munday, Stephen Walton, Economics As Level and A Level, Cambridge University Press, 2002