Factors of production
factors of production (or productive inputs or resources) are the inputs used in the production process of goods or services in the attempt to make an economic profit. The factors of production include land, labor, capital and entrepreneurship. Finished gods are the output. Input determine the quantity of output. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function. There are 4 factors of production Namely:-
3) Capital (created by savings)
4) Entrepreneurship (skills which are created and risk taking)
Land- This is the natural resources available for production of goods and services. Land is usually a limited resource for many economies. Although some natural resources, such as timber, food and animals, are renewable, the physical land is usually a fixed resource. Using land for industrial purposes allows nations to improve the production processes for turning natural resources into consumer goods. The reward for land is rent. Labour-this is the skills of the workforce and the quantity of labour they produce,also the human input in the production process. Labor includes both the physical effort of factory workers and farmhands often associated with labor, as well as the mental effort of executives and supervisors,whether skilled or unskilled. The reward for capital is interest. Capital-refers to investment used in the production process in goods that can produce other goods in the future or used to accumulate further wealth. It is a manmade resource. The reward for capital is interest. Entrepreneurship-this is the special sort of human effort that takes on the risk of bringing labor, capital, and land together to produce goods. Entrepreneurship is the factor that organizes the other three. Without someone to organize production, the other three factors do NOT produce. A key component of entrepreneurship is risk. This...
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