Resources

Resources
Resources are the inputs, or factors of production, used to produce the goods and services that people want. Goods and services are scarce because resources are scarce. Resources sort into four broad categories: labor, capital, natural resources, and entrepreneurial ability. Labor is human effort, both physical and mental. It includes the effort of the cab driver and the brain surgeon. Labor itself comes from a more fundamental resource: time. Without time we can accomplish nothing.We allocate our time to alternative uses: we can sell our time as labor, or we can spend our time doing other things, like sleeping, eating, studying, playing sports, going online, watching TV, or just relaxing with friends.
Capital includes all human creations used to produce goods and services. Economists of- ten distinguish between physical capital and human capital. Physical capital consists of facts

ries, machines, tools, buildings, airports, highways, and other human creations employed to produce goods and services. Physical capital includes the taxi driver’s cab, the surgeon’s scalpel, the farmer’s tractor, the interstate highway system, and the building where your eco- nomics class meets. Human capital consists of the knowledge and skill people acquire to en- hance their productivity, such as the taxi driver’s knowledge of city streets, the surgeon’s knowledge of human biology, and your knowledge of economics.
Natural resources are all so-called gifts of nature, including bodies of water, trees, oil re- serves, minerals, and even animals. Natural resources can be divided into renewable resources and exhaustible resources.A renewable resource can be drawn on indefinitely if used conserva- tively. Thus, timber is a renewable resource if felled trees are replaced to provide a steady supply. The air and rivers are renewable resources if they are allowed to clean themselves of pollutants. More generally, biological resources like fish, game, livestock, forests, rivers, groundwater, grasslands, and soil are renewable if managed properly. An exhaustible resource— such as oil, coal, or copper ore—does not renew itself and so is available in a limited amount. Once burned, each barrel of oil and each ton of coal are gone forever.The world’s oil reserves and coal mines are exhaustible.
A special kind of human skill called entrepreneurial ability is the talent required to dream up a new product or find a better way to produce an existing one.The entrepreneur tries to discover and act on profitable opportunities by hiring resources and assuming the risk of business success or failure. Every large firm in the world today, such as Ford, Microsoft, and Dell, began as an idea in the mind of an entrepreneur.
Resource owners are paid wages for their labor, interest for the use of their capital, and rent for the use of their natural resources.The entrepreneur’s effort is rewarded by profit, which equals the revenue from items sold minus the cost of the resources employed to make those items.The entrepreneur claims what’s left over after paying other resource suppliers. Sometimes the entrepreneur suffers a loss. Resource earnings are usually based on the time these resources are employed. Resource payments therefore have a time dimension, as in a wage of $10 per hour, interest of 6 percent per year, rent of $600 per month, or profit of $10,000 per year.