The major input used by service company is: Select
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Answer:
Factors of production are inputs used to produce an output, or goods and services. They are resources a company requires to attempt to generate a profit by producing goods and services. Factors of production are divided into four categories: land, labor, capital and entrepreneurship.
Factors of Production
Land is the natural resource that an enterprise uses to produce goods and services to generate a profit. Land is not just restricted to the physical property or real estate. It includes any natural resources the land produces, such as crude oil, coal, water, gold or natural gas. The resources are natural materials that are included in the production of goods and services.
Labor is the amount of work laborers and workers perform that contributes to the production process. For example, if a laborer works and her efforts create a good or service, she contributes to labor resources.
KEY TAKEAWAYS
Factors of production are resources a company uses to generate a profit by producing goods and services.
Land, labor, capital and entrepreneurship are the four categories of factors of production.
The primary debate and separation between capitalism and socialism is about the ownership of the primary factors of production.
Capital is any tool, building or machine used to produce goods or services. Capital varies throughout each industry. For example, a computer scientist uses a computer to create a program; his capital is the computer he uses. On the other hand, a chef uses pots and pans to deliver a good and service, so the pots and pans are the chef's capital.
Entrepreneurship combines these factors of production to earn a profit. For example, an entrepreneur brings together gold, labor and machinery to produce jewelry. The entrepreneur takes on all the risks and rewards that come with producing a good or service.
Economic Schools of Thought on Factors of Production
Most economic schools identify the same types of factors of production: land, labor, capital and entrepreneurship (intellectual capital and risk-taking). Monetarist, neoclassical and Keynesian schools of thought are mostly in agreement about who should own the factors of production and their roles in economic growth. Marxist and neo-socialist schools argue that the factors of production should be nationalized and that growth primarily comes from labor capital. The Austrian school is perhaps the most capital-intensive school, suggesting that the structure of the factors of production determines the business cycle.
The chief debate between capitalism and socialism is about the ownership of the primary factors of production. Capitalists believe that private ownership is a necessary condition for competition, innovation, and sustained economic growth. Socialists and Marxists argue that accumulated private capital leads to unchecked wealth disparity and the concentration of power in the hands of a few business interests.
Austrians contend the factors of production need to be viewed as heterogeneous and time-sensitive.
Austrians argue that normal Keynesian and neoclassical models are fundamentally flawed because they aggregate all production capital into senseless snapshots. For example, the standard notion of gross domestic product (GDP) treats all investment as equal and treats all capital goods sales as equal.
How Do Factor Endowments Impact a Country's Comparative Advantage?
Related Terms
How Factors of Production Work
Factors of production are the inputs needed for the creation of a good or service. The factors of production include land, labor, entrepreneurship, and capital. more
What the Production Possibility Frontier (PPF) Curve Shows
The production possibility frontier (PPF) is a curve that is used to discover the mix of products that will use available resources most efficiently. more
Physical Capital Definition
In economic theory, physical capital is one of the three main factors of production, along with human capital and land/natural resources. It consists of manmade goods—machinery, vehicles, and supplies—that help produce something. more
Command Economy Definition
A command economy is a system where the government determines production, investment, prices and incomes. more
Austrian School Definition
The Austrian school is an economic school of thought that originated in Vienna during the late 19th century with the works of Carl Menger. more
Economic Recovery Definition
An economic recovery is a business cycle stage following a recession that is characterized by a sustained period of improving business activity