The factor of production that consists of factories and equipment used in production, as well as improvements to natural resources, is called Physical Capital.
The resources that make up the foundation of the economy and are used by people to produce products and services are called factors of production. The four categories of factors of production that economists distinguish between are land, labor, capital, and entrepreneurialism.
Physical capital is made up of physical, man-made items that businesses invest in or purchase and employ to manufacture things. Physical capital assets that are reusable and not consumed during production, such as manufacturing equipment, also fall under the category of fixed capital.
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