what are the four requirements of production? Explain?
Answers
Explanation:
The four requirements of production of goods and services are land, labor, physical capital and human capital. Land is the physical place where all the economic activity takes place. Land plays an important part in production because land itself and the resources on it are usually limite..
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Answer:
THERE ARE FOUR REQUIREMENTS OF PRODUCTION:
1. LAND
2. LABOUR
3. PHYSICAL CAPITAL
4. ENTREPRENEUR
EXPLANATION:
1.LAND ÷
=>IT REFERS TO THE NATURAL RESOURCES. ALL NATURAL RESOURCES EITHER ON THE SURFACE OF THE EARTH OR BELOW THE SURFACE OF THE EARTH OR ABOVE THE SURFACE OF THE EARTH IS LAND.
ONE USES A LAND TO PRODUCE GOODS. IT IS THE NATURAL FACTOR OF PRODUCTION. ALL GIFTS OF NATURE SUCH AS RIVERS, OCEANS, LAND, CLIMATE , MOUNTAINS ,MINES, FOREST ETC,.THE PAYMENT FOR LAND IS RENT. LAND IS A FREE GIFT OF NATURE . IT HAS NO COST OF PRODUCTION.
2.LABOUR÷
=>THE SECOND REQUIREMENT IS LABOUR.ALL HUMAN EFFORT THAT ASSISTS IN PRODUCTION IS LABOUR . THIS EFFECT CAN BE MENTAL OR PHYSICAL. IT IS A HUMAN FACTOR OF PRODUCTION. THE PAYMENT FOR LABOUR IS WAGE. SOME PRODUCTION ACTIVITIES REQUIRED HIGHLY EDUCATED WORKERS TO PERFORM THE NECESSARY TASK. OTHER ACTIVITIES REQUIRE WORKERS WHO CAN DO MANUAL WORK. EACH WORKER IS PROVIDING THE LABOUR NECESSARY FOR PRODUCTION. THERE ARE TWO TYPES OF LABOUR:
- SKILLED LABOUR
- UNSKILLED LABOUR
3. PHYSICAL CAPITAL÷
=> THE THIRD REQUIREMENT IS A PHYSICAL CAPITAL,i.e. THE VARIETY OF INPUTS REQUIRED AT EVERY STAGE DURING PRODUCTION. THERE ARE TWO TYPES OF PHYSICAL CAPITAL:
- FIXED CAPITAl
- => Tools and machines range from very simple tools such as a farmer's plough to sophisticated machines such as generators ,turbines, computers ,etc,. Tools, machines , buildings can be used in production for many years and are called fixed capital.It includes long term financial decisions.It is mainly required operational activities. it is used to buy fixed assets like land and building. it consists of land ,tools, building, machine, etc,. It is used to acquire non current assets of the company.
- WORKING CAPITAL
=>PRODUCTION REQUIRES A VARIETY OF RAW MATERIALS ARE USED BY THE WEAVER AND THE CLAY USED BY THE POTTER. ALSO, SOME MONEY IS ALWAYS REQUIRED DURING THE PRODUCTION TO MAKE PAYMENTS AND BY OTHER NECESSARY ITEMS . RAW MATERIALS AND MONEY IN HAND ARE CALLED WORKING CAPITAL. UNLIKE TOOLS, MACHINES AND BUILDINGS THESE ARE USED IN PRODUCTION.IT INCLUDES SHORT TERM FINANCIAL DECISIONS. IT IS REQUIRED FOR TRADING ACTIVITIES . IT CONSISTS OF CASH, MARKETABLE, SECURITIES, ACCOUNTS ,RECEIVABLE ,STOCKS, etc,. IT IS USED TO ACQUIRE CURRENT ASSETS OF COMPANY.
4. ENTREPRENEUR÷
=> THE ENTREPRENEUR IS A PERSON WHO BRINGS OTHER FACTORS OF PRODUCTION IN ONE PLACE. HE USES THEM FOR PRODUCTION PROCESSES. HE SHOULD BE A KNOWLEDGEABLE PERSON. AN ENTREPRENEUR MUST HAVE ABILITY TO ORGANISE. HE MUST HAVE PROFESSIONAL APPROACH. HE HAS GREAT ADMINISTRATIVE POWER AND MUST BE A MAN OF ACTION.
Every production is organised by combining land labour physical capital and human capital which are known as factors of production.
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