explain the factors of production
Answers
Factors of production is an economic term that describes the inputs used in the production of goods or services in order to make an economic profit. ... The factors of production include land, labor, capital, and entrepreneurship.
1. Land/Natural Resources
Land refers to all natural resources. These resources are gifts that are given by nature. Some typical examples of natural resources are water, oil, copper, natural gas, coal, and forests.
These resources can be renewable, such as forests, or nonrenewables such as oil or natural gas. The income earned from land or other such natural resources is called rent.
2. Labor
Four Factors of Production labor
Labor, as a factor of production, involves any human input. The quality of labor depends on the workforce’s skills, education, and motivation. Generally speaking, the higher the quality of labor, the more productive is the workforce.
If someone has ever paid you for a job, you have contributed labor resources to the production of goods or services. Labor can be physical or mental. The income earned by labor resources is called wages. It is the largest source of income for most people.
3. Capital
Here capital refers to manufactured resources such as factories and machines. These are man-made goods used in the production of other goods. Their use in commercial production is what separates them from consumer goods.
Some other examples of capital include hammers, forklifts, conveyor belts, computers, and delivery vans. An increase in capital goods means an increase in the productive capacity of the economy.
The income earned by owners of capital resources is interest.
4. Entrepreneurship
Four Factors of Production entrepreneurship
An entrepreneur is someone who takes on risk and brings the other three factors of production together. Entrepreneurs are a vital engine of economic growth helping to build some of the largest firms in the world as well as some of the small businesses in your neighborhood.
The payment an entrepreneur receives is called profit as a reward for the risk they take.
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