Like all goods and services, bananas are made from land, labor, and capital.
- What is the name of the banana that most of us eat?
- What was the name of the banana that was most popular until the 1950s?
- By the 1960s, why had most of us switched to a new banana?
- Why again might a new banana have to replace what most of us currently consume?
- Why is it so easy for TR4 to travel around the world?
- After a banana arrives in the U.S., where does it travel before the supermarket shelf?
The Economic Idea: Factors of Production
Every good and service is made of land, labor, and capital. Sometimes called a factor recipe (because land, labor, and capital are the factors of production), the formula for making goods like bananas involves land that is defined as any naturally existing resource, and labor, the human input. Meanwhile, the capital part of the equation can be physical or human. It can be tools and equipment and education.
When we look at the factor recipes for a banana, in South America, we see plantations with land extending for miles. On the land are the people that provide the labor. Those people have a variety of skills that can be called their human capital while they work with the tools that are their physical capital.
Activity Goal: To consider factor recipes.
Procedure: A pass around exercise.
- On a slip of paper note an example of land as a factor of production. Anything natural, it could range from acreage to a lake to a mineral.
- Then pass your piece of paper to the person on your right. That person should add an example of labor. It would tell something about what the person does on the “land.”
- Then, pass the paper with land and labor to a third individual who will add an example of physical capital.
- Finally, a fourth person gets the paper and decides what can be made with this factor recipe.
- Each person should share factor recipes with the entire class.