Factors of
production
Economics 12-B
Factors of production is an economic concept that refers to the
inputs needed to produce goods and services. The factors are
land, labor, capital, and entrepreneurship. The four factors
consist of resources required to create a good or service, which
is measured by a country’s gross domestic product (GDP).
A:The four factors of
production—land, labor,
capital, and
entrepreneurship—apply to
all countries, but their
availability, quality, and
contribution vary widely
depending on the country’s
economic development,
resources, and social
structure.
Q: Does the
utilization of
factors vary
according to
the country?
1) Land
Land as a factor of production
includes the natural resources
used to create a good or
service.
“These can be renewable resources like forests
or nonrenewable resources like oil, gold or
water.”
"Entrepreneurial activity is the engine of innovation that brings
new ways of organizing
land, capital and labor to produce new goods and
services,"Edward Petersmarck, executive director of practice
development at M&O Marketing.
2) Labor
as a factor of production
refers to the effort that
individuals exert when
they produce a good or
service.
For example, an artist producing a painting or
an author writing a book.
Labor itself includes all
types of labor performed
for an economic reward,
such as mental and physical
exertion.
3) Capital
The third factor of production
is capital. Think of capital as
the machinery, tools and
buildings humans use to
produce goods and services.
Some common
examples of
capital include
hammers,
forklifts,
conveyer belts,
computers, and
delivery vans.
4) Entrepreneurs
are the people
who combine the
other factors of
production –
land, labor and
capital – to
generate profit.
"Entrepreneurial activity is the engine of
innovation that brings new ways of
organizing
land, capital and labor to produce new goods
and services."
-Luis Portes, professor of
economics at Montclair State University.
Factor mobility
1.
refers to the ability to move factors of
production—labor, capital, or land—out of one
production process into another. Factor mobility
may involve the movement of factors between
firms within an industry, as when one steel
plant closes but sells its production equipment
to another steel firm.
Occupational mobility
barriers to moving easily between jobs.
• For example, a worker leaves a job
as an accountant to takes a job as
a computer programmer.
•
Some factors are highly mobile
and thus are easily switched. Other
factors are highly immobile and not
easily able to switch production
activities.
Geographical mobility
barriers to changing location to get a
new job.
For example, migration of individuals
or groups, moving from one place to
another and traveling to attractive
destinations in an increasingly global
world
Thank you