The Factors of Production - YouTube

Welcome to Economics class today we will learn about the factors of production.  

There are four factors of production  land, labor, capital, and entrepreneurship,  

these factors are scarce in other  words, there is a limited amount of each  

so sometimes the factors of production are also called the "scarce means of production".  

This lesson will explain each of these factors and why they are scarce, first let's take a look  

at land, land is so valuable that sometimes it is priced by the square foot, the value  

of land is based on three important factors; one location, two scarcity, and three natural resources.  

If land is in a great location for example near a busy intersection in a major city, it is likely to  

be very valuable, similarly, if land is scarce meaning there is not a lot of land available  

it can also be very expensive. Land can  also be expensive if it contains valuable  

natural resources like oil, gold, or minerals, or even if it is forest land or rich farmland,   

since there is a limited amount of land on earth the most desirable land is relatively scarce.  

Now we will look at labor, even though we hear about unemployment, factories closing, and laying  

off workers and people who are underemployed, Labor  is still scarce because there are a limited number  

of people who possess certain skills, these skills can be mental, emotional, or physical. There are  

always shortages of certain skills in different parts of the country and in different regions of  

the world, for example there are not enough science and bilingual teachers to fill all the open  

teaching positions in the United States, Doctors are needed in many small towns in isolated rural  

areas, in some parts of the country farmers can't harvest all their crops because there are not  

enough people willing to do this strenuous work, for minimum wage, in difficult outdoor conditions.

Additionally, sometimes we can tell how  scarce labor is by looking at how much  

we have to pay for it, some kinds of labor such as health, or legal services are very expensive  

this is because only a few people have the skills in education to perform these jobs.  

Next up is capital, capital is anything of value that is used for the production of goods and  

services, this includes office buildings, factories, shopping malls, farm machinery, computers, printers  

and any other tool used for producing goods, some businesses invest a lot of money in capital  

for example, it would require a lot more money to build a plant that manufactures airplanes than  

to open a bagel shop. Last is entrepreneurship, an entrepreneur is someone who starts a new business  

or introduces a new product, an entrepreneur knows  how to recognize an opportunity to make a profit,  

raise money to open a business, and hire labor to run the business and entrepreneurs know how  

to combine the other factors of production, land, labor, and capital to make money. Entrepreneurship  

is scarce because few people have the knowledge and ability to succeed. In the United States  

three out of five new businesses fail within the first two years of operation, of the businesses  

that survive most remain small companies but that is no reason not to give it a try.