The Factors of Production

Economists group the resources used to produce goods and services into 4 factors of production: land (natural resources like soil, water, and minerals), labor (the human effort and skill people contribute), capital (human-made tools, machinery, and equipment used to produce other goods, NOT money itself, which is more precisely called financial capital, used to acquire these things), and entrepreneurship (the willingness to take on risk and organize the other 3 factors to create a new good, service, or business). Each factor is typically paid differently for its contribution: land earns rent, labor earns wages, capital earns interest, and entrepreneurship earns profit.

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