FACTORS OF PRODUCTION

SIXTH GRADE

BMS

FACTORS OF PRODUCTION1. Natural Resources –or land that has all the gifts of nature including:

– mineral deposits, water, arable land, vegetation, natural forests, marine resources, other animal life, the atmosphere and the sun. Minerals are a limited, non-renewable resource

2. Labor - (Human capital)– Quality

(knowledge) is better than quantity

3. Capital goods- items used to create goods & services

4. Entrepreneurship – innovators (creating new products)– The entrepreneur is the driving force behind production.– Entrepreneurs introduce new products and new techniques – Risk takers- the people who take chances. They do this

because they anticipate that they will make profits. But they may also suffer losses and perhaps bankruptcy.

THE THREE LITTLE PIGS•What do the Three Little Pigs have to do with economics?•Once upon a time…

http://www.youtube.com/

watch?v=Olo923T2HQ4

THREE LITTLE PIGS•What do you know about…

– Straw? – Wood? – Brick?

•What additional items are needed to build the houses?

•Who is needed to build the houses?

What is Human Capital?

• Training and education by taking classes and/or job experience that increases a persons value in the work place.

• Intelligence or physical skill• Training increases productivity• People with more education earn more $$• What are some examples of investing in

Human Capital?• Teachers invest in human capital

WHICH OF THE THREE LITTLE PIGS HAS THE MOST HUMAN CAPITAL?

This is a fictional story, so the pigs don’t need to be human to have human capital.

CAPITAL GOODS• Capital goods are tools used in the production of

other goods.• Some examples are factories, machinery, tools,

equipment• Capital goods are also any raw materials used to

manufacture goods and services.• Money is NOT a resource – Money is a means

or medium of exchange– Money is not worth anything by itself, its value is what

we can exchange the money for.

WHICH OF THE THREE LITTLE PIGS USED A CAPITAL RESOURCE TO BUILD THEIR HOME?

RESOURCE LISTSNatural Resources

Capital Resources

Human Resources

GDP: GROSS DOMESTIC PRODUCT

• Measure economic progress of a country

• Value of goods and services produced by a country’s economy during a specific year.

• Germany and the United Kingdom have two of the strongest economies in Europe so they have a high GDP.

• Russia and Ukraine are slowly working their way out of the effects of being a command economy under communist control for years.

Who would make more money each year: a doctor or a data entry worker?

• What would explain this?• Amount of education or investment in human

capital• The doctor is required 8+ years of education

after high school and earns $200,000 (average)• With data entry, only a high school degree is

required. The average salary being $26,000.

HOW TO INCREASE YOUR GDP

Invest in Human Capital

Example: Education, Training Invest in Capital

Example: Factories, Machinery, Computers Most countries in Europe have good education systems

and strong capital investments

Example: Germany invests in its human capital and capital good. It has one of the strongest economies. Ukraine’s educational systems suffered because there was little money for school. Russia did not invest in capital investments which left manufacturing plants with old, outdated technology and machinery.

ENTREPRENEURS

• They come up with new ideas and use human, capital, and natural resources to bring ideas to the marketplace.

• Entrepreneurs are willing to take risks to create the new product or service.

• Entrepreneurs are valuable because they introduce innovative products.

• European countries do not have as many entrepreneurs as the U.S. due to high taxes, government regulations, and job security.