Factors of Production
Factors of production are the resources/productive input used to produce goods and services. These resources are vital for the production of all types of goods and services.
The four factors of production are:
Labour is is generally defined as the ability to work which can either be physical (working with the hand – lifting, carrying or even cutting) or mental that is brain work for example managing, directing, accounting etc. The terms labor represents human resources people use to produce goods and services.
Labour can be classified in three categories:
a. Skilled
These skills required may have been developed through specialized training or developed on the job. Example: Teachers, doctors, nurses, lawyers, engineers, architects.
b. Semi-skilled
These workers need to get further training to be able to perform the task really well. Example a practical nurse or a Nurse’s aide in a hospital.
c. Unskilled
There is no special ability required to perform these tasks Example Men who carry buckets of cement on a construction site.
3. Capital
Capital: Capital is the productive resources made by human efforts; including resources such as buildings, machinery, vehicles and tools. “Capital” consists of tools, equipment, machines and buildings that producers use to produce something else. Capital represents all man-made resources. For example resources may be used to build factories in which goods are then produced
4. Entrepreneurship
Entrepreneurship is the creative decision making, risk taking or starting a business venture, it involves the coordinating of all the factors of production in order to produce goods and services. The entrepreneur can be an individual or a group. The factors of land, labour and capital are brought together by the entrepreneur to satisfy the consumer needs for goods and services
The entrepreneur is responsible for:
Qualities / Skills of an Entrepreneur
To be a successful and ideal entrepreneur, one should have certain qualities or skills as given below :
The four factors of production are:
- Land (including all natural resources)
- Labour (including all human resources)
- Capital (including all man-made resources)
- Entrepreneurship/Enterprising (which brings all the previous resources together for production)
1. Land
Land as a factor of production and includes not only the physical land itself but not all natural resources found on the earth’s surface as well as above and below the surface. Land includes mineral deposits such as bauxite, oil, iron, ore gold and diamonds, rivers, ponds and lakes etc.
- On the surface (e.g. soil, agricultural land, etc.)
- Below the surface (e.g. mineral resources, rocks, ground water, etc.)
- Above the surface (e.g. climate, rain, space monitoring, etc.)
Labour is is generally defined as the ability to work which can either be physical (working with the hand – lifting, carrying or even cutting) or mental that is brain work for example managing, directing, accounting etc. The terms labor represents human resources people use to produce goods and services.
Labour can be classified in three categories:
a. Skilled
These skills required may have been developed through specialized training or developed on the job. Example: Teachers, doctors, nurses, lawyers, engineers, architects.
b. Semi-skilled
These workers need to get further training to be able to perform the task really well. Example a practical nurse or a Nurse’s aide in a hospital.
c. Unskilled
There is no special ability required to perform these tasks Example Men who carry buckets of cement on a construction site.
3. Capital
Capital: Capital is the productive resources made by human efforts; including resources such as buildings, machinery, vehicles and tools. “Capital” consists of tools, equipment, machines and buildings that producers use to produce something else. Capital represents all man-made resources. For example resources may be used to build factories in which goods are then produced
4. Entrepreneurship
Entrepreneurship is the creative decision making, risk taking or starting a business venture, it involves the coordinating of all the factors of production in order to produce goods and services. The entrepreneur can be an individual or a group. The factors of land, labour and capital are brought together by the entrepreneur to satisfy the consumer needs for goods and services
The entrepreneur is responsible for:
- Source funding
- Create or start a new product
- Formulate idea
Qualities / Skills of an Entrepreneur
To be a successful and ideal entrepreneur, one should have certain qualities or skills as given below :
- Ability to organize : He should be able to organize various factors effectively. He has to understand all the aspects of the business.
- Professional approach : He should be objective and professional in approach.
- Risk bearer : He should be risk taker. He should be ready to bear risk and uncertainties.
- Innovative : Organizer should be innovative. He should adopt modern techniques of production. He should not be reluctant to changes.
- Decision Making : One has to take right decision at a right time by showing his promptness. Quick decisions are expected but hasty decisions shouldn't be taken. Delay in decisions may increase cost of project and reduce the profits.
- Negotiation skills : Businessman regularly comes into contact with various persons like consumers, workers, government officials, etc. so he should communicate tactfully.