Explain the factors of production एक्सप्लेन द फैक्टर्स ऑफ़ प्रोडक्शन
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Answer:
In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, finished goods and services. The utilized amounts of the various inputs determine the quantity of output according to the relationship called the production function.
Explanation:
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Labor as a Factor
Labor refers to the effort expended by an individual to bring a product or service to the market. Again, it can take on various forms. For example, the construction worker at a hotel site is part of labor as is the waiter who serves guests or the receptionist who enrolls them into the hotel.
Within the software industry, labor refers to the work done by project managers and developers in building the final product. Even an artist involved in making art, whether it is a painting or a symphony, is considered labor.
For the early political economists, labor was the primary driver of economic value. Production workers are paid for their time and effort in wages that depend on their skill and training. Labor by an uneducated and untrained worker is typically paid at low prices. Skilled and trained workers are referred to as human capital and are paid higher wages because they bring more than their physical capacity to the task. For example, an accountant’s job requires synthesis and analysis of financial data for a company. Countries that are rich in human capital experience increased productivity and efficiency.
The difference in skill levels and terminology also helps companies and entrepreneurs arbitrage corresponding disparities in pay scales. This can result in a transformation of factors of production for entire industries. An example of this is the change in production processes in the Information Technology (IT) industry after jobs were outsourced to countries with a trained workforce and significantly lower salaries.
Capital as a Factor
In economics, capital typically refers to money. But money is not a factor of production because it is not directly involved in producing a good or service. Instead, it facilitates the processes used in production by enabling entrepreneurs and company owners to purchase capital goods or land or pay wages. For modern mainstream (neoclassical) economists, capital is the primary driver of value.
As a factor of production, capital refers to the purchase of goods made with money in production. For example, a tractor purchased for farming is capital. Along the same lines, desks and chairs used in an office are also capital.
It is important to distinguish personal and private capital in factors of production. A personal vehicle used to transport family is not considered a capital good. But a commercial vehicle that is expressly used for official purposes is considered a capital good. During an economic contraction or when they suffer losses, companies cut back on capital expenditure to ensure profits. During periods of economic expansion, however, they invest in new machinery and equipment to bring new products to market.
Entrepreneurship as a Factor
Entrepreneurship is the secret sauce that combines all the other factors of production into a product or service for the consumer market. An example of entrepreneurship is the evolution of social media behemoth Facebook Inc. (FB). Mark Zuckerberg assumed the risk for the success or failure of his social media network when he began allocating time from his daily schedule towards that activity. At the time that he coded the minimum viable product himself, Zuckerberg’s labor was the only factor of production.
After Facebook became popular and spread across campuses, Zuckerberg realized that he needed help to build the product and, along with co-founder Eduardo Saverin, recruited additional employees. He hired two people, an engineer (Dustin Moskovitz) and a spokesperson (Chris Hughes), who both allocated hours to the project, meaning that their invested time became a factor of production. The continued popularity of the product meant that Zuckerberg also had to scale technology and operations. He raised venture capital money to rent office space, hire more employees, and purchase additional server space for development.
At first, there was no need for land. However, as business continued to grow, Facebook built its own office space and data centers. Each of these requires significant real estate and capital investments.
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