Unit four
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Factors of Production |
Essential vocabulary
Assets n – the things that a company owns, that can be sold to pay debts – активи; власність; майно; капітал; кошти; фонди. Physical/fixed assets – основний капітал, основні фонди, фізичні активи. Syn. possessions, property, capital.
Effort n – an expense of strength and energy to achieve a desired end – зусилля, намагання. To put an effort in/into something – вкладати зусилля. Syn. an attempt.
Capital n – money or property, especially when it is used to start a business or to produce more wealth – капітал; основний капітал. Capital goods – засоби виробництва, основний капітал, human capital/assets – людський капітал, capital production resources – основні виробничі ресурси. Syn. assets, money, funds, property, wealth.
Item n – each separate article or thing included in a list, inventory, record, etc.; – пункт, параграф; питання, позиція; окремий предмет (у списку); вид товару, товар (окреме найменування в асортименті); виріб. Syn. a thing, an article, an object.
Labour n – 1. work, especially physical work – праця; труд; 2. all the people who work for a company or in a country – робоча сила; робітники; працівники.
Means n – something that enables a purpose to be fulfilled –засоби. Means of production – all goods that are made with the purpose of using them to produce other goods – засоби виробництва. Syn. capital goods.
Monetary adj – relating to money, especially all the money in a particular country –грошовий; монетний; монетарний; валютний.
Own v – to have something which belongs to you, especially because you have bought it, been given it etc and it is legally yours– мати, володіти. Syn. to possess, to have.
Payment n – the sum of money paid –платіж, сплата. To make payment – здійснювати платіж. Syn. a pay.
Reward n – something given or received for service, effort, or achievement – винагорода. Syn. a compensation.
Risk n–a chance or possibility of suffering loss, danger, injury, etc–ризик. To take/assume/ a/the risk(s), to risk – ризикувати, наражатися на ризик. Syn. a hazard.
Similar adj – resembling without being identical – схожий, подібний; відповідний.
Transform v – to completely change the appearance, form, or character of something or someone, especially in a way that improves it – видозмінювати; змінювати (природу чого-н., характер), (into) перетворювати. Syn. to convert, to change, to turn into.
Shift v – to move or transfer from one place or position to another, or make something do this – переміщати; пересувати; перекладати; переносити; переміщатися; пересуватися; переїжджати. Syn. to move, to transfer.
TEXT
Economic resources are the goods or services available to individuals and businesses used to produce valuable consumer products. They are scarce relative to the limitless needs and wants of people and businesses operating in the economy. That’s why it is important to use these resources efficiently in order to maximize the output that can be produced from them. The economic resources that go into the creation of valuable products desired by consumers are also called the factors of production.
Traditionally, most economists distinguish three factors of production: land, labour, and capital. A fourth item, entrepreneurship, is often considered as an additional factor of production because individuals are responsible for creating businesses and allocating economic resources in the business environment.
Land is the economic resource comprising natural resources, the things provided by nature, such as soil, timber, fisheries, minerals and other similar items. Since land is in limited supply it is a fixed economic resource. The only free unlimited land resource is the air you breathe: everything else is scarce since there is not enough to satisfy everyone’s demands. Those who own or control natural resources get a rent, the price paid for the use of land.
Labour represents the human capital available to transform physical resources into consumer goods. Almost all individuals are capable of providing labour as a factor of production by putting physical and/or mental efforts or, in other words, thousands of different abilities and skills, into the creation of goods and services. The price paid for the use of labour is called wages representing income to the workers, who own their labour.This factor of production is a flexible or active resource as a nation can shift this resource to different areas of the economy according to the needs of individual consumers in the economy.
It should be noted that not all labour is of the same quality. Some workers are more productive than others because of increased natural skill, received education, training and experience. The amount of labour depends ultimately on the population of the country and on the number of people who are available to work. Those in school and universities, those retired, too handicapped to work*, mothers who stay at home with their children are not part of the labour force.
Capital has two economic definitions as a factor of production. Capital can represent the monetary resources companies use to purchase natural resources, land and other capital goods or pay workers for transforming assets into consumer products. Besides capital is the major physical (fixed) assets including buildings, production facilities, machinery, roads, vehicles, and other similar items which individuals have made to produce other goods and services. All these items are also called the means of production. Individuals may create their own capital production resources, purchase them from another individual or business or lease them for a specific amount of time from individuals or other businesses. Payment for the use of someone else’s money, or capital, is called interest. Economists consider capital as an active resource too because it can also be allocated or shifted to meet the needs of individuals and businesses in the economic market.
Entrepreneurship is considered a factor of production since someone must perform the managerial functions of gathering, allocating and distributing economic resources or consumer products to individuals and other businesses in the economy. Entrepreneurship can be defined as the willingness of business owners to take risks of introducing new products and services to the market. It includes the managerial or organizational skills needed by most firms to initiate the process of production of goods and services.
Entrepreneurs are people who bring together the other three productive resources to make goods and services. The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business are profits.
Today, information has become vitally important therefore it is identified by most economists as the fifth factor of production. Information means facts and figures about markets and competition that are often stored on computers and are accessible immediately. This is a computer era, and business cannot compete without information about markets, financial and other important business conditions.