1. Explain the various factors of production.
Answers
Explanation:
Factors of Production |
.. Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship. The first factor of production is land, but this includes any natural resource used to produce goods and services. ... The second factor of production is labor.
Explanation:
Land
It refers to all natural resources. All natural resources either on the surface of the earth or below the surface of the earth or above the surface of the earth is Land.
One uses the land to produces goods. It is the primary and natural factor of production. All gifts of nature such as rivers, oceans, land, climate, mountains, mines, forests etc. are land.
The payment for land is rent.
Characteristics of Land as a Factor of Production
The land is a free gift of nature.
The land has no cost of production.
It is immobile.
The land is fixed and limited in supply.
Types of Land
Residential
Commercial
Recreation
Cultivation
Extraction
Uninhabitable
Labor
All human effort that assists in production is labour. This effort can be mental or physical. It is a human factor of production. It is the worker who applies their efforts, abilities, and skills to produce.
The payment for labour is the wage.
Characteristic
It is a human factor.
One cannot store labour.
No two types of labour are the same.
Types of Labor
Unskilled
Semi-skilled
Skilled
Professional
Capital
Capital refers to all manmade resources used in the production process. It is a produced factor of production. It includes factories, machinery, tools, equipment, raw materials, wealth etc.
The payment for capital is interest.
Characteristics
Capital is a manmade factor of production.
It is mobile.
It is a passive factor of production.
Types of Capital
Fixed
Working
Venture
Entrepreneur
An entrepreneur is a person who brings other factors of production in one place. He uses them for the production process. He is the person who decides
What to produce
Where to produce
How to produce
A person who takes these decisions along with the associated risk is an entrepreneur.
The payment for land is profit.
Characteristics
He has imagination.
He has great administrative power.
An entrepreneur must be a man of action.
An entrepreneur must have the ability to organize.
He should be a knowledgeable person.
He must have a professional approach.