Economic Factor of production Land: All natural resources provided by nature such as fields, forests, oil, gas, metals and other mineral resources. The payment for land use and the received income of a landowner is rent. Labour: Human effort used in production which also includes technical and marketing expertise. The payment for someone else's labour and all income received from one own labour is wages. Labour can also be classified as the physical and mental contribution of an employee to the production of the good(s). Capital: Human-made goods (or means of production) which are used in the production of other goods. These include machinery, tools and buildings. Enterprise: The skill and risk-taking ability of the person who brings together all the other factors of production together to produce goods and services. Usually, the owner or founder of a business. Choices 1. What to produce? 2. How to produce? 3. For who to produce for? Scarcity When the demand for a resource is greater than the supply of that resource, as resources are limited. Scarcity results in consumers having to make decisions on how best to allocate resources in order to satisfy all basic needs and as many wants as possible. Trade-off This means that choosing more of this one thing can only be achieved by giving up something else in exchange. Opportunity cost The profit is lost when one alternative is selected over another. The cost of the next best alternative is forgone when choices are made The law of opportunity cost When all resources are being used, an increase in the production of one goods will lead to greater forgone production of another good.