Question

how do farmers arrange labour and capital for their production?

Answer 1

Small farmers usually need to borrow money to arrange for the capital, and are put to great distress to repay the loan. Therefore, capital too is a scarce factor of production, particularly for the small farmers. Though both land and capital are scarce, there is a basic difference between the two factors of production.

Answer 2

Farmers arrange labour and capital for their production by the following ways:

        1. Gaining loans from banks or informal sectors.

        2. Using profits from last sale of crop.

        3. Selling or pawning their belongings (tractors, cattle).

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