What Is the Meaning of Economic Resources?

by Jane Smith - Updated July 17, 2018

Everything is an economic resource: including the trash from your lunch this afternoon and the ideas that came to you while singing in the shower or daydreaming at your desk. Anything you have serves as an economic resource if you can harvest or manufacture, buy and sell, swap and build, pledge or gamble with it. These business-related resources used to consist of nothing more than natural resources and manufactured goods. Natural resources include water and fish, timber and minerals along with agricultural products. On the other hand, manufactured goods consist of anything made from those same natural resources.

Tips

  • Economists use the terms economic resources and factors of production interchangeably.

What Are Economic Resources?

Economic resources consist of five factors: land, capital, labor, management and knowledge.

What Are the Factors of Production?

First, you combine land and money with the efforts of your workforce to create products to distribute. Management oversight and the wisdom gained through on-the-job training correspond to an older economic term: entrepreneurship. All five concepts blend to complete the resource group. Together, these types of resources comprise the five most important factors of production.

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Which Economic Resources Build Your Business?

Stockpiles of stuff can only help your business grow after you identify which things complement your business model. For example, that trash from lunch won't be any help at all to a check-cashing store, but it could start a passive income source for your restaurant. You can either compost it yourself to use in a rooftop garden or sell it to someone who already runs a compost business. Restaurants often run on very slim margins. Marketing your rooftop garden or selling composted leftovers both add value to your restaurant while being civic-minded.

Do you run a produce stand? Turn surplus garden and farm produce into jams and jellies, pies and cakes or make and flash-freeze some grab-and-go soups or casseroles. Auto mechanics might turn used auto parts into sculptures or create swings and climbing gyms from used tires. This practice of upcycling trash into useful items keeps materials out of the waste stream and reduces your potential liability for any health problems related to your company's solid waste production.

How Does Labor Shortage Affect Your Business?

The size of the available labor force can make or break your business model. So can the match between your potential employees' basic knowledge and life skills and the requirements of the job. A tight labor market requires competitive wages and working conditions, driving your overhead costs upward. A labor pool whose life experiences and previous employment history differ from the requirements of your industry costs you more in both time and money to train. Once trained, some workers will leave to pursue other interests, causing you to have to start over. This workforce churning reduces effectiveness, lowers morale and further erodes your company's profit margin.

Land Concerns: What About Physical Space?

Many business owners do not plan enough physical space for eventual expansion. Sometimes your startup budget prevents you from acquiring a building that suits your current needs and allows for natural growth. When the real estate market has too many empty buildings, some landlords will advertise that they "will build to suit." The landlord provides an allowance for tenant improvements if needed. A tenant improvement allowance means that tenants may alter the wall and floor coverings, light fixtures and fixed furnishings such as shelves and counters. They can also install accessibility improvements such as grab bars and entry ramps, widened doors and right-height bathroom fixtures without up-front costs.

About the Author

Jane Smith has provided educational support, served people with multiple challenges, managed up to nine employees and 86 independent contractors at a time, rescued animals, designed and repaired household items and completed a three-year metalworking apprenticeship. Smith's book, "Giving Him the Blues," was published in 2008. Smith received a Bachelor of Science in education from Kent State University in 1995.

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