microecon-asign 3 (productive resources)

• Productive resources


  Inputs used to create wealth and produce goods/services
• Factors of production


  • Land
  • Labor
  • Capital
  • Entrepreneurship
• Land


  Natural resources in their natural environment (e.g. coal, trees)
• Capital resources


  Things produced to help produce other things (e.g. buildings, equipment, vehicles, machinery)
• Human capital


  Knowledge and skills that improve workforce productivity (e.g. education, training)
• Labor


  Physical and mental efforts of humans in the production process
• Entrepreneurship


  Ability to combine factors of production in new ways to achieve new results, willingness to take risks for profit
• Factors of production do not always fit neatly into the four categories
• Money is not a factor of production
• Production Possibilities Frontier (PPF)

  Represents the maximum combination of two goods/services that can be produced with available factors of production
• Increase or improvement in factors of production


  PPF shifts outward
• Decrease or loss of quality in factors of production

  PPF shifts inward
• Severe shortage of one factor of production


  Changes the shape of the PPF
• Factors of production changing


  • Dairy farm buys new cows (PPF expands outward)
  • Dairy cows form union and refuse to give milk (PPF shifts inward)
• Education and training are considered human capital, not physical capital
• The basic problem of economics is scarcity, not neo-conservatism
• Economics assumes humans have unlimited wants and limited resources
• The four factors of production are land, labor, capital, and entrepreneurship
• An increase in a factor of production will cause the PPF to expand outward
• Entrepreneurship creates wealth
• TANSTAAFL stands for "There ain't no such thing as a free lunch"
• Natural resources include fossil fuels, trees, and coal mines
• An increase in a factor of production, other factors held constant, will result in an outward shift of the Production Possibilities Frontier
• Movement along the PPF represents a trade-off in production possibilities
• A decrease in a factor of production, other factors held constant, will result in an inward shift of the Production Possibilities Frontier