Chapter 1, Problem 1FRQ

To determine

The resources and their categories along with the characteristic of resources which forces the producer to make choices.

Explanation of Solution

Resources are something that can be used in producing other goods and services. They can be used in producing both final goods and intermediate goods. Resources are also known as the factors of production.

Resources or factors of production can be classified into four categories:

1. Land: Piece of land including timber, water, and other natural resources<
2. Labor: Skilled or semi-skilled workers<
3. Capital: Machinery, tools, and buildings<
4. Entrepreneurship: Strategies and innovation

Resources are limited in quantity terms. As every resource including natural and man-made is exhaustive, if producers keep using them continuously, these resources will exhaust one day. The number of skilled workers, machinery, piece of land for factories, raw materials, and production permits is a few examples of scarce resources. Therefore, making choices is necessary for better utilization of these limited resources to get optimum output.

So, scarcity is the main characteristic of resources which results in the need to make choices.