FACTORS
OF
PRODUCTION
FACTORS OF PRODUCTION
We are going to discuss:
WHAT ARE THE FACTORS OF
PRODUCTION?
Factors of production are:
Rewards for the factors of
production..(what do
factors of production gain
in return?)
Land
Labour
Reward: Wages
Reward:Rent
FACTORS OF PRODUCTION
Are the economic resources used to
produce goods and services.
Capital
Reward: interest
Enterprise
Reward: Profit
REWARDS GIVEN TO FACTORS OF
PRODUCTION
The rewards to factors of production are:
Factor
Reward
land
Rent. For example, a payment may need to be made for the site on which
a factory will be built and this payment is called rent.
Labour
Wages and salaries. Wages are paid to workers when they are paid on an
hourly, daily or weekly base. A salary refers to an annual amount of
payment. A proportion of which is usually paid to a worker each month.
Capital
Interest. Interest is the payment made on any money that is borrowed to
buy capital equipment, such as machinery, is called interest
Enterprise Profit. Enterprise involves the taking of risk and the reward for taking
such a risk is called profit
Mobility of factors of
production
Mobility of Land?
Supply of land
• Physical amount of
land available do not
change much
Renewable resources
• These resources can be
replaced by nature e.g.
Water from well, fish
Non- renewable resources
• These resources cannot
be replaced by nature
e.g. gold, oil
Land
All the natural resources used in the production e.g. coal,
minerals, water, plot of land..etc
Mobility of land
• Land is occupationally
mobile and
geographically
immobile
Occupationally mobile
• Means the land is
capable of changing its
use
e.g. farming land can also
be used to build hospital
Geographically mobile
•
•
Means the land cannot
be moved from one place
to another
Oil reserves in Sudan
cannot be moved to India
Mobility of capital

Supply of capital changes with time
• Gross investment- total value of goods produced in the year.
• Depreciation- is the won out of machines (the value of
replacement goods)
• Net investment- is the value of additional goods to the next
year (gross investment-depreciation)
Mobility of capital changes according to the situation
e.g. a delivery van is geographically mobile (can be moved from one place to another) and also
occupationally mobile (can be used to deliver papers to schools or can change it to deliver food)
e.g. Coal mine or a dock are geographically and occupationally immobile
Mobility of labour
 Ifjvvv
Mobility of workers change both
occupationally and geographically
Geographical
Occupationalimmobility
immobility
•• Different
prices in different
areas
Lack of information
about
job available
•• Family
ties
Lack of skills
•
•
•
•
Quality is also
important for
deciding supply
of labour
It can be decided
by the
productivity i.e.
the output per
worker
Different educational systems
Restrictions on movement of workers
Supply of labour:
• Number of workers available
• Number of working hours
Number of available
workers
• number of working
hours
•
•
•
•
•
size of population
Age structure
Retirement age
School leaving age
Attitude to working
women
Length of the
working day
Holidays available
Sickness & illness
Mobility of enterprise
ddd
Enterprise
The ability to bear the risks,
make decisions, and
organise other factors of
production
Entrepreneur is a person who:
•
•
•
Bears risks
Organise other factors of production
Make decisions
Supply of entrepreneurs depend on various
factors like:
•
•
•
Education system
Government regulations in the economy
and other
Mobility of entrepreneurs
The enterprise is the most mobile factor
of production occupationally and
geographically
THANKS