When people are interested in the economy, they often think of GDP and how much money is being spent by consumers. But there’s another side to the economy that has just as much of an impact: household income. Households earn their income when purchasing factors of production in markets. In this blog post, we’ll discuss what you need to know about a household’s earnings model! The first step in understanding a household’s earnings model is to think about the four types of factors of production – land, labor, capital and entrepreneurship.
These are all different parts that make up an economy: for example, entrepreneurs might start new businesses or invest their money into existing ones; laborers can work at these business enterprises as well as other places like farms. Land could be used to grow crops or livestock. Capital refers both to natural resources such as iron ore and coal mines but also things like machinery that help us produce goods more quickly or efficiently than we would without them (think tractors). The last type of factor needed by households to earn income is entrepreneurship- this includes starting new companies and investing in others’ ventures. Some