Best if printed in landscape.

Economic Resources (and their return)
based on McConnell and Brue. Economics 16th ed. Boston: McGraw-Hill Irwin. 2005.

Economic resources -- resources used in the production of goods and services, these can be categorized as

• Land (all natural resources) -- rent
• Labor (all physical and mental talents of individuals) -- wage
• Capital (all manufactured aids used in producing goods and services) -- interest
• Entrepreneurial ability (initiator, innovator, strategic decision maker, risk taker) -- profit

Would it be helpful to categorize the resources and their returns as: land (rent), labor (wage), capital (interest), information (royalty), and assuming risk of net operating loss (profit)?

• To what extent can each of these resources be "purchsed" if the business owner does not already possess them? To what extent does the business owner have to bring these resources to the enterprise, rather than rely on someone else to provide them? What is the impact of the business owner "purchasing" the resources, rather than "bringing them" to the business?
• Additional thoughts about the resource categories:
  • labor includes management
  • capital is a combination of debt and equity capital
  • land is a combination of owned and leased land
  • information encompasses production technology and market information (both input and product markets)
  • some inputs do not fit neatly into just one category, for example, is knowing how to produce a product labor (that is, a skill of the owner or an employee) or is it information?
  • a business can pay someone to assume risk, e.g., insurance; but it also encompasses paying extra for an input to assure the input is always available for the business operation
  • if business owners pay for all risks to be assumed, no profit will remain for them

Last Updated October 20, 2005

Email: David.Saxowsky@ndsu.edu

This material is intended for educational purposes only. It is not a substitute for competent professional advice. Seek appropriate advice for answers to your specific questions.

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Published by Agricusiness and Applied Economics
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