Definition: Commodities are goods (physical) and services (non-physical) exchanged in markets.
Definition: Resources are the inputs used in the production of goods and services.
It is the limit to resources that limits the production of commodities.
Classical economics (@1770 - @1870) divided resources into three categories – Land,
Capital, and Labour –, called the ‘factors of production’, but modern economics adds
Entrepreneurship as a fourth category of resource.
Each factor of production has a corresponding factor return: Rent for Land, Interest for
Capital, Wage for Labour, and Profit for Entrepreneurship. Since we concentrate only on Labour
and Capital in this course, we will typically use profit for the return to capital but this is not
Land: Land is defined as a natural resource, i.e., a non-human input not produced by society
Capital (K): Capital is defined as a non-human input that has been produced by human society
Note: Capital is always physical, not merely financial. Bonds, stocks, mortgages, etc., are
financial assets but they are no