Factors of production: the four resources everything is made with.
The four factors of production
| Factor | What it is | Its reward |
|---|---|---|
| Land | Natural resources: soil, water, oil, fish | Rent |
| Labour | People's work, physical and mental | Wages |
| Capital | Man-made tools: machines, roads, buildings | Interest |
| Entrepreneurship | Organising the other three and taking the risk | Profit |
The points to remember
- Land, labour, capital, entrepreneurship: four factors.
- Capital means man-made tools, not money.
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Scarcity is the basic economic problem: unlimited wants, limited resources.
Why there is never enough
Wants are unlimited
Once we have food and shelter, we want phones, travel, better health care.
Resources are limited
There is only so much land, labour, capital and enterprise.
So we must choose
Every society decides what to make with what it has.
The points to remember
- Scarcity is relative: even rich countries cannot have everything.
- Scarcity forces choice.
See how examiners mark answers
Answer exam-style questions with model answers. Learn exactly what earns marks and what doesn't.
Scarcity also asks how long resources will last.
Scarcity and sustainability
Using resources faster than they renew
Fish, forests and soil can run out if overused.
A real case
Overfishing collapsed the cod stocks off Newfoundland, and fishing was banned in 1992.
Choices for the future
Sustainable use leaves enough for future generations.
Paper 2 asked this in May 2025, for 2 marks.
The government wants to encourage entrepreneurship among young people.
Define the term entrepreneurship.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
What earns each mark
1 mark
Starting a business, without saying what the entrepreneur does with the factors.
2 marks
Organising land, labour and capital, and taking the risk of the business.