FACTORS OF PRODUCTION MEANING OG FACTORS OF PRODUCTION Factors of production are those resources or activities which makes it possible for goods to be produced. Factors of production can also be called Agents or inputs of production. The four factors of production are: 1. Land 2. Labour 3. Capital 4. Entrepreneur 1. LAND: land is a free gift of nature. It refers to the natural resources with economic value used in production. Example, coal, Tin, Gold, crude oil. Etc are drilled from land. The reward or payment for land is Rent. FEATURES OF LAND 1. Land is a free gift of nature 2. Land is fixed in supply 3. Land consists of resources in water, on dry surface of the earth and under the earth. 4. The reward for land is rent 5. Land is immobile. IMPORTANCE OF LAND 1. Land is used for farming 2. Land is used for livestock production (rearing Animals) 3. Land is used for wild life conservation 4. Land can be used as collateral security to obtain loan in the bank 5. Land is used for residential purpose 6. Land is the source of minerals like Gold, Tin Kerosene, Petroleum etc. 2. LABOUR: It refers to human efforts both physical and mental put into production. There are two kinds of Labour a. Skilled labour: are highly trained workers, such as Doctors, Lawyers, Engineers, teachers etc. b. Unskilled Labour: they are Labourers who are untrained such as people who clean the roads or streets, mend roads etc. The reward for Labour is wages and salaries. FEATURES OF LABOUR 1. Labour is human factor of production 2. Labour is a mobile factor of production 3. Labour has feelings 4. Labour cannot be predicted 5. Labour can be developed through training 6. The reward for labour is wages and salaries IMPORTANCE OF LABOUR 1. To operate the machines in factories 2. Labour provides the required skills needed in production 3. Labour influences other factors of production 4. It helps in the production of goods and services CAPITAL Capital refers to the man-made resources used in production. All those things that are used for production in which the owner of the business has invested money is Capital. Eg machines. The reward for capital is interest. FEATURES OF CAPITAL 1. Capital is a man-made wealth used in production 2. Capital is subject to depreciation 3. Capital is highly durable 4. Capital comprises money and machinery 5. The reward for capital is interest IMPORTANCE OF CAPITAL 1. Capital facilitates production 2. It helps in the production of quality goods 3. It increases standard of living 4. It attracts investors into the business 5. ENTREPRENEUR OR ORGANISATION An Entrepreneur is a person or organization that decides to go into business, he organizes all other factors of production in order to provide goods and services. The reward or Entrepreneur is Profit/Loss. 1. 2. 3. 4. 5. 6. 7. FEATURES OF ENTREPRENEUR He is a risk bearer He provides capital for the business He is a Decision maker He employs labour He organizes and controls other factors of production He is also called Enterprise or management The reward for Entrepreneur is called Profit or Loss IMPORTANCE OF ENTREPRENEUR 1. He provides the capital needed for production 2. He is a decision maker 3. He bears the risk of the business 4. He manages and controls the business.
