Factors of Production

• Factors of production are the economic resources used to produce goods and services
• Factors of production include: land, labor, capital, and enterprise
• A way to remember the factors of production is to think of "CELL":

  • C stands for Capital
  • E stands for Enterprise
  • L stands for Land
  • L stands for Labor
• Land represents natural resources and the physical space where production occurs
• Labor represents human effort and skill applied to the production process
• Capital refers to tools, machinery, and financial resources used in production
• Enterprise encompasses innovation, organization, and risk-taking
• Entrepreneurs drive the entrepreneurship and risk-taking that drives the production process
• Factors of production are the inputs in the production process
• A business is the transformation process that converts factors of production into outputs
• An opportunity cost is something that is given up in order to do something else. The business must weigh up the opportunity costs of picking one option over the other.