HOW to ProduceA second question is that of HOW to produce.Should factory owners use mass production methodsthat require a lot of equipment and few workers,or should they use less equipment and moreworkers? If an area has many unemployed people,the second method might be better. On the otherhand, mass production methods in countries wheremachinery and equipment are widely available canoften lower production costs. Lower costs makemanufactured items less expensive and, therefore,available to more people.,FOR WHOM to ProduceThe third question deals with FOR WHOM toproduce. After a society decides WHAT and HOWto produce, the things produced must be allocatedto someone. If the society decides to produce housing,should it be distributed to workers, professionalpeople, or government employees? If thereare not enough houses for everyone, a choice mustbe made as to who will receive the existing supply.These questions concerningWHAT, HOW; and FOR WHOMto produce are not easy for any societyto answer. Nevertheless, theymust be answered as long as thereare not enough resources to satisfYpeople's seemingly unlimited wants.not created by humans. "Land" includes deserts,fertile ftelds, forests, mineral deposits, livestock,sunshine, and the climate necessary to grow crops.Because only so many natural resources are availableat any given time, economists tend to think ofland as being fixed, or in limited supply.For example, there is not enough good farmlandto adequately feed all of the earth's population,nor enough sandy beaches for everyone toenjoy, nor enough oil and minerals to meet ourexpanding energy needs indefinitely. Because thesupply of a productive factor like land is relativelyfixed, the problem of scarcity is likely to becomeworse as population grows in the future.CapitalAnother factor of production is capital-thetools, equipment, machinery, and factories used inthe production of goods and services. Such itemsare also called capital goods to distinguish themfrom financial capital, the money used to buy thetools and equipment used in production.The Factors of ProdudionThe reason people cannot satisfYall their wants and needs isthe scarcity of productive resources.The factors of production, orresources required to produce thethings we would like to have, areland, capital, labor, and entrepreneurs.As shown in Figure 1.2, allfour are required if goods and servlcesare to be produced.LandIn economics, land refers to the"gifts ofnature," or natural resourcesaki 9 Dec"s 0 5 If we cannot have everything we want,then we have to choose what we want the most. Why must asociety face the choices about what, how, and for whom toproduce?CHAPTER 1: WHAT [S ECONOMICS' 7
The Factors of Production,J; ~Land,~~.c