NAME                                                  DATE                     CLASS 
               Economics of History Activity                                                netw  rks
               The Industrial Age
               Lesson 3 An Age of Big Business
               The Factors of Production and the 
               Carnegie Steel Company
                 Background Information
                 In economics, factors of production are resources used to produce 
                 something. There are three factors of production. The first factor is land. 
                 Land refers to the land itself, as well as natural resources that come from 
                 the land. The second factor of production is labor. Labor refers to all the 
                 jobs that people do that are used to produce something. The third factor of 
                 production is capital. Capital refers to things used to make products. 
                 Capital can be in the form of capital goods, such as factories and machines, 
                 or in the form of money.
                 An entrepreneur is a person who organizes the factors of production to 
                 start a business. Few entrepreneurs have been as successful as Andrew 
                 Carnegie. Carnegie participated in many businesses, but his most important 
                 was steel. Carnegie opened his first steel plant, called the Edgar Thomson 
                 Works, in 1875. To do this, he used the factors of production.
                 The first factor of production, land, can refer to just the land itself. 
                 Carnegie built his first steel factory on a piece of land near Pittsburgh. Land 
                 can also refer to the natural resources used to make a product. To make 
                 the steel, the plant used iron and other minerals. Coal was burned to melt 
                 the materials together. All of these resources are examples of “land” as a 
                 factor of production.
                 The second factor of production is labor. Hundreds of people worked at 
                 Carnegie’s Edgar Thomson Works. Carnegie built housing so his employees 
                 would have a place to stay. They worked long hours for little pay. Carnegie 
                 also hired experts in management and steelmaking to make his factory 
                 more efficient. They too were part of “labor.”
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                 The third factor of production is capital. The factory itself and all of the 
                 machinery used to make steel inside the factory were capital goods. The 
                 factory used the new Bessemer process to make steel. This process uses a                           by 
                 huge machine called a converter. It was the most important capital good in                         The 
                 the plant.                                                                                         McGra
                 Money is also capital. Carnegie needed money to build the steel mill. He                           w-Hill 
                 obtained capital from investors.
                 Carnegie combined land, labor, and capital and made the Edgar Thomson                              Companies
                 Works a success. In fact, the factory is still making steel today. 
                                                                                                                    .
              NAME                                               DATE                   CLASS 
              Economics of History Activity Cont.                                     netw  rks
              The Industrial Age
                   Directions Answer the following questions.
              1. Identifying What are the three factors of production?
              2. Applying What made Andrew Carnegie an entrepreneur?
              Critical Thinking
              3. Inferring Why do you think Carnegie located the Edgar 
                 Thomson Works next to a river?
              4. Evaluating Can you identify a factor of production that 
                 Carnegie did not need in starting his business? Explain 
                 your answer.
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