What Is the Meaning of Economic Resources?

by Osmond Vitez; Updated September 26, 2017

Economics is commonly referred to as the social study of the allocation of goods and services used by consumers and businesses. Resources are an integral part of economic study since they are the items consumed by individuals and businesses.

Types

Three basic resources are found in the study of economics: land, labor and capital. Other resources are included as well, such as entrepreneurship, time and profit, although they are not considered as fundamentally important as the first three resources.

Definition

Land represents the abundance of all natural things, such as wildlife, timber, minerals or fields. Labor is the effort of man to take the natural resources and convert them into valuable goods. Capital is the money spent or invested into land and labor.

Significance

Each basic resource plays an important part in the economic cycle, since having control over one item exclusively is not extremely valuable. Although one person may control a natural resource, labor and capital are needed to convert the items to sellable goods.

Considerations

Individuals in a free market place a value on each resource and good produced from these resources. This allows the economic marketplace to function in a format where all individuals can succeed when using their resources.

Warning

Allowing a single entity to control all resources will lead to a socialist or communist society, which distorts the free market’s natural ability to allocate resources according to each individual’s need.

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