what is factor of production ??? explain
Answers
There are four requirements for production of goods and services.
1. The first requirement is land which is the natural resource and is very useful for production of goods and services.
2.The second requirement is labour i.e. people who will do the work. The value of their work depends on their education,skills and desire to do a good job.
3. The third requirement is physical capital i.e. the variety of inputs required at every stage during production.
There are two types of physical capital:-
a. Fixed capital refers to the funds invested in fixed or permanent things such as land,machinery etc.
b.Working capital refers to the funds invested in temporary things such as raw materials and money.
4. The fourth requirement is human capital.
Factor of production refers to the inputs that are used in the process of production of goods which produce economic profits for the economy. There are 4 factors of production ; land, labor, capital and entrepreneurship.
1. Land: This includes all natural resources used in the production of goods and services. These include the raw materials used in production process. For e.g wood, soil, water, livestock etc.
2. Labor: Labor represents all of the people that are available to transform resources into goods or services . For e.g carpenter produces wooden products etc.
3. Capital: It is the start up money required for the start of any business. Money and equipment are considered capital for any business. Capital can be the money that companies use to buy resources.
4. Entrepreneurship: Entrepreneurs are needed to regulate business activities and control the assets.