1.3.1—Factors of production

Land means natural resources; labour is human effort; capital is produced equipment and infrastructure used to make goods; enterprise organises resources and bears risk.

Capital is not the same as money: a machine is physical capital, while finance purchases it. Factors can be combined in different proportions and may be complements or substitutes.

A bakery uses land and energy, labour from bakers, ovens as capital and an entrepreneur who coordinates production and accepts uncertainty.

Entrepreneurship is not merely owning a business, and “capital” in economics does not mean every financial asset.