Productive Resources

Productive resources are materials used to produce goods and services. They can be both tangible, as in capital and raw materials, and intangible, like ideas, for example. Economics is basically about how these productive resources interact in the process of production and how the resources are utilized by people. Goods and services don’t just come out of nothing; they are drawn from other material, and are processed or manufactured. One would not be wrong, therefore, to say that anything that is involved in the process of producing goods and services is a productive resource. This includes labor, land and the raw materials as well as the entrepreneurship skill.


There are several ways of categorizing productive resources. One is according to their nature, and the other is according to their perceived level of productivity. Considering the nature of resources, one can group them into three main categories: Natural resources, human resources and physical resources. Natural resources are those provided by nature. Land is perhaps the most important natural resources. And there are others like water and vegetation. Human resources are provided by people. Labor and entrepreneurship skill make for the most important human resources for economics. Often, the value of human resources depends on the particular economy, and the particular nature of activity they are engaged in.


It is difficult to imagine any business going on without land. Land is the ultimate natural resource required for nearly every economy. Even though the world today has embraced new technology, with concepts such as online business coming into play, land is still a requirement for every economy. Business has to take place somewhere, and inevitably, this somewhere is on land.

Returns from land are referred to as rent, which is the actually the perceived value of the land. The value of land depends on factors such as location, size, fertility and the level of developments that have been done on that piece of land.


Labor is a human resource that is basically about the work done by humans in a bid to produce goods and services. Returns from labor are called wages, which are the payments people get when they work. Wages vary according to the type of work as well as the level of expertise of an individual.


Capital refers to the initial wealth of a business entity; the amount of money a business starts off with. However, it may not necessarily be in form of money. Other forms of capital include raw materials and equipment. Whatever one earns from capital is called profit.

Entrepreneurial skill

This is the skill that enables one to start off a business. In a typical setting, an entrepreneur starts and owns a business, along with the ideas of that business. An entrepreneur is a decision maker in the business, and he is the one who invests his capital into the business. Therefore, an entrepreneur expects returns from the business, which come in form of profits earned after selling the goods and services.

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