The Factors Of Production And Their Rewards

Topics: Economics, Factors of production, Entrepreneurship Pages: 12 (2371 words) Published: January 27, 2015

HOW TO ENHANCE FACTORS OF PRODUCTION TO GROW AN ECONOMY

Vicky Michaella IRADUKUNDA

How to enhance the of production factors to grow an economy? Factors of Production are an economic term to describe the inputs that are used in the production of goods or services in the attempt to make an economic profit. The factors of production include land, labor, capital and entrepreneurship. The capital is all of the tools and machinery used to produce a good or service. Land represents all natural resources, such as timber and gold, used in the production of a good. While labor is all of the work that laborers and workers perform at all levels of an organization, except for the entrepreneur. The entrepreneur is the individual who takes an idea and attempts to make an economic profit from it by combining all other factors of production. Economic growth is the increase in the market value of the goods and services produced by an economy over time. It typically refers to the growth of potential output; therefore, since the factors of production are the inputs used for production, these lasts need to be enhanced in order to speed up economic growth. Each economic factor of production has its rewards as follows: Land is rewarded by rent

Capital rewarded by Interest
Entrepreneurship rewarded by Profit
Labor rewarded by wages, salaries How to enhance the factors of production?

1. Land
Land is not created by mankind but it is a gift of nature. So, it is called a natural factor of production, it is also called a primary factor of production. Usually land means the surface of earth but in economics it has a wider meaning.It is all the materials and forces which nature gives freely for man’s aid in land, water, in air and light and heat. Land is the original sources of all material wealth. Therefore, the economic prosperity of a country is closely linked with the richness of its natural resources. The quality and quantity of agricultural wealth of a country depends on nature of soil, climate, and rainfall. Thus all aspects of economic life (agriculture, trade and industry) are generally influenced by Land in economics. . The productivity of land depends upon following factors.

1. Natural factors: The factors like soil, climate, rainfall, topography influence the productivity. The sandy soil with low rainfall always yield less but it is not so in cause of black cotton soil. It always yields more. 2. Human factor: Man is always trying his best how maximum output can be obtained from land. So many deficiencies are always tacked good yields. This human effort is very important to increase the productivity. And the human choice of the use of a land is also very important because it determines the yield of the land. For example if two people own two plots of land that are side by side and that have the same size, one of them decides to build apartments and the other to create a small business centre with several shops, the yields of the two fields would differ, in terms of money generated monthly. 3. Situation factor: The location of the land many a times determines the productivity. The fertile land in remote corner of the country perhaps may not be cultivated but the land having less fertility but located nearby marked can give a good yield. The location of land is also important in other sectors like business; for instance the use and value of a land in Rongai and the CBD in Nairobi differs greatly. The land in Rongai might be used to build apartments, while the one in the middle of the CBD will be used to build shops, create parking lots, etc and is therefore worth more than the one in Rongai. Demand is the only a determinant of Rent because supply of land is fixed. Supplyof land is vertically fixed. It cannot be increased or decreased as land is not portable. Supply and...
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