![]() ![]() The third is the discovery of new ways to extract natural resources in order to use them. The second is the discovery of new uses for resources, as happened when new techniques allowed oil to be put to productive use or sand to be used in manufacturing computer chips. One is the discovery of new natural resources, such as the discovery of a deposit of ore containing titanium. The natural resources available to us can be expanded in three ways. The wilderness is thus a natural resource. If people gain enjoyment from the existence of a beautiful wilderness area, then that wilderness provides a service. It became a natural resource because people discovered and implemented a way to use it.ĭefining something as a natural resource only if it can be used to produce goods and services does not mean that a tree has value only for its wood or that a mountain has value only for its minerals. Oil is now used to make all sorts of things, including clothing, drugs, gasoline, and plastic. It was not until the mid-nineteenth century that a method was found for refining oil into kerosene that could be used to generate energy, transforming oil into a natural resource. No one knew what could be done with the oil. ![]() Pennsylvania farmers in the eighteenth century who found oil oozing up through their soil were dismayed, not delighted. However, 250 years ago oil was a nuisance, not a natural resource. Oil in the ground is a natural resource because it is found (not manufactured) and can be used to produce goods and services. The field, the cows, and the milk and beef they produce are all examples of the factor of production known as land.Ĭonsider oil. That requires knowledge we must know how to use the things we find in nature before they become resources. The second is that they can be used for the production of goods and services. The first is that they are found in nature-that no human effort has been used to make or alter them. For this reason, it is helpful to think of "land" as "natural resources." There are two essential characteristics of natural resources. Remember that the factor of production known as land is not just the land itself "land" refers to the items humans get from nature. The entrepreneur is a risk-taker and the creative element that allows a free market economy to evolve as consumer demand changes. It is this person who ultimately tries to combine the factors of production to make a product or provide a service that people want and sell it for a profit. The entrepreneur is the one who believes that he/she has a better idea of how to build “a better mousetrap”. The last factor of production is the entrepreneur, or the person with the idea to create a product or develop a service. Any equipment or items used by a business, to help the business function, is a capital good. Capital is both the result of production (assembly of a bulldozer) and can be used in production (bulldozer used on a construction site). The third factor of production is capital, or capital goods, which are the tools or equipment necessary for production. The labor force may expand or contract over time, or it can evolve with changes to the market, but in the long run it will impact the economy of a country. Labor is performed by people and it is the total amount of talent and effort that a country’s labor force has to create products or services. Labor is what each person does as part of their livelihood or job to pay for their existence. ![]() The concept of land has to do with specific items that humans get from nature, such as natural resources or things that are produced by the land, such as farm products.
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