What are resources?
Resources of an economy are the factors of production or the inputs which are used to produce an output i.e. goods and services. These can be classified into four categories.
Land
Land includes all resources found in the sea and on land. They are also known as natural resources. Land is said to be immobile and is limited in supply. Land is subject to the law of diminishing returns.
Law of diminishing returns states that given a fixed factor, variable factors added to it will eventually lead to a fall in marginal product.
Labour
Labour refers to input of human efforts, both physical and mental. However, only those human efforts are considered in economics as labour which has the sole purpose of receiving rewards. Any kind of labour done for pleasure is cannot be considered as labour.
Labour has greater mobility than land but is less mobile than capital and cannot be stored.
Mobility of labour
It refers to the movement of labour. There are two types of labour mobility. These are:
Geographical mobility
It is the movement of labour from place to another. But there are many barriers to geographical mobility which are as follows:
- Workers may have insufficient information or unawareness of the opportunities existing in different places.
- Sometimes age may be a factor. Older workers are more immobile than younger ones.
- Social ties or sentimental reason may discourage workers to move to other places.
Occupational mobility
It refers to the willingness and mobility of worker to change from one occupation to another.
- Labour may lack necessary skills and qualifications needed to relocate to another job.
- Certain occupation may have entry requirements and restrictions.
- Personal liking of the occupation may discourage a worker to move to other occupations.
- Some workers may be too cautious in taking risk and moving to another occupation.
Capital
These are manmade resources which help to produce many other goods and services.
It can be classified as:
Fixed capital
These are physical assets which do not vary as the level of output varies and its form does not change in the course of production. Examples include factories, machines, and dockyards and so on.
Working capital
It consists of stocks of raw materials and stocks of semi-finished and finished goods awaiting purchase of consumers. It varies with the level of output. Thus, when output increases, the working capital also increases.
Entrepreneur
Entrepreneur is the person who brings all the factors of production together and organises them to produce goods and services. An entrepreneur decides what to produce, how to produce and for whom to produce.
