What are the four requirements for the production of goods and services? Write the important features of physical capital
Answers
1. Land:
In literary sense, land is regarded as soil. However, in economics, land, a factor of production, has a much wider scope. Marshall has defined land as, “the materials and the forces which nature gives freely for man’s aid, in land and water, in air and light and heat.” Land refers to a natural resource that can be utilized to produce income. It is a useful factor of production, but is available in limited quantity.
2. Labor:
Labor constitutes one of the important factors of production. This factor involves human services and efforts for the production of goods or services. Labor is commonly thought of a group of unskilled labor working in factories. However, in economic terms, a work, physical or mental, carried out for monetary purpose is called labor.
A work that is undertaken by an individual for the sake of interest and pleasure, then the individual would not be regarded as labor in economics. According to Marshall, “Any exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work is called labor.”
Physical capital refers to variety of inputs that are needed at different stages of production such as tools, machinery, finances, raw material etc.
4) Human Capital -
Human capital is the fourth requirement of production of goods and services. Human capital is the knowledge and effort that is put into arrange for the other requirements like land, labor and physical capital to start the production of goods and services.