Another term for factors of productions is the economic resources. The factors of production are the services and goods used by business and individuals to produce valuable products for the consumers. The factors of production tend to describe each resource’s function to the business environment (Johnson, 2014). The four factors of production are the following:

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1. Land – this is an economic resource that contains the natural resources found in a nation’s economy. This resource entails farm, fisheries, land, timber, and other natural resources. This resource is normally a limited resource in many economies. The physical land has always been a fixed natural resource. Land can be used for industrial purposes, and this allows for improving the production process.

2. Labor – labor is the human capital that is commonly used to transform national or raw resources into goods needed by the consumers. Human capital entails all the persons who are capable of working in the economy of a nation (Fuss & McFadden, 2014). The individuals can also provide other types of services to business and individuals. This factor of production is a flexible resource. This is because a person can be taken to a different place to offer his or her services. It is easy to improve this factor of production, especially through education or training of a worker so as to compete business or technical functions.

3. Capital – this factor of production has two different definitions. Capital can mean the monetary resource normally used by entities to purchase other capital goods and natural resources. Monetary resource always flows through the economy of a nation as people sell and buy resources to businesses and other individuals. The main physical assets are companies and individuals use in the process of producing services and goods are also capitals. The assets include production facilities, building, vehicle, equipments, and other similar items.

4. Entrepreneurship – this is termed as a factor of production because the factors of production can be present in the economy, but they cannot be transformed into goods needed by the consumers (Johnson, 2014). The entrepreneurs always have the required knowledge needed for making valuable services and goods. These individuals are ready to take the risks involved in the creation of consumer goods. Entrepreneurship is also classified as a factor of production because individuals have to complete function related to managerial, such as collecting, allocating, and distributing consumer products or natural resources to other business and individuals in the economy.

Production possibility frontier (PPF)
Production possibility frontier can also be termed as production possibility curve, product transformation curve, or production possibility boundary. PPF is a curve, and it represents production tradeoff with regards to fixed resources in an economy. In microeconomics application, it depicts various combinations of costs of two commodities, which and can decide to produce while making use of a fixed amount of the factors of production. On a macroeconomic level, the graph can be used to show other trade-offs that are rivals, such as consumption versus saving (Beggs, 2015). The production possibility frontier curve can show a shift. The shift can occur either to the right or left. The right shift is considered to be the best since it means increased possibilities for production. A shift to the left will mean a reduction in the possibilities for production. Below is an example of the production possibility frontier for a country having resources to produce refrigerators and cars:

B is the spot where the nation makes maximum use of its production possibility to produce an equal number of both refrigerators and cars. C represents where the country decides to make more cars and fewer refrigerators, while point A shows the opposite, that is, more refrigerators and fewer cars. X shows when the country is not maximizing its production possibility. It can decide to make any commodity at this point, such as the refrigerators and the cars. Spot Y is far beyond the production possibility frontier for the country. This means that the country cannot make products to such limit.

What causes shift to the production possibility frontier
1. Change in technology – the technological change increases the production or ability of an economy to produce (Sjol, 2015). For example, development of a faster computer or new machines will improve efficiency of a company when it comes to production. This will mean the production possibility frontier curve will shift to the right.

2. Economic growth – growth in the economy will give more room for increased production of both consumer goods and capital. This economic growth will mean the production possibility frontier would shift to the right (Cahuc, Carcillo & Zylberberg, 2014).

3. Natural disasters – the natural disaster causes destruction. When it hits, it can destroy a number of inputs, especially those that were in the process of production. An example of a natural disaster is the hurricanes, such as those that are normally experienced in the United States. Such disaster can destroy a number of factories, and this will reduce production. There will be lower production in the economy due to the event of such disaster (Bowler, 2014). The other example of the natural disaster is the earthquakes being experienced in Japan. This can destroy factories and cause a stoppage in the production process. Natural disaster will make the production possibility frontier to shift to the left.

4. Capital growth – growth of capital for a country or a business is normally a good signal. The capital growth will make the production possibility curve to shift to the right. This rightwards shift is a sign for increased possibilities for production.

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  • Bowler, I. R. (Ed.). (2014). The geography of agriculture in developed market economies. London, UK: Routledge.
  • Cahuc, P., Carcillo, S., & Zylberberg, A. (2014). Labor economics. Cambridge, MA: MIT press.
  • Fuss, M., & McFadden, D. (Eds.). (2014). Production Economics: A Dual Approach to Theory and Applications: Applications of the Theory of Production (Vol. 2). London, UK: Elsevier.
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  • Sjol, K. (2015). Applying the Production Possibilities Model. Retrieved from: