what is the basic difference between the two factors of production land and capital
Answers
Land is the first and foremost factor or production. It is the chief source of production. Economic prosperity of a country depends to a great extent on the quality of land. Land and capital are two important factors of production in economics. Land has a special meaning in Economics. It includes all those free gifts of nature which are owned and managed by individuals and institutions. In Economics, land denotes the surface of the earth as well as other elements like rivers, mountains, forests, oceans, minerals etc. There are some differences between land and capital as factors of production in economics.
Capital denotes produced means of production. It denotes all those means of production like machinery, raw materials, factory buildings etc., which help in the production of goods and services. Both land and capital are essential for starting and continuing the manufacture of goods and services. In spite of the close affinity between land and capital, they differ from one another in the following aspects –
Difference Between Land And Capital As Factors Of Production
1) Both differ in their nature. Land is considered a free gift of nature. No one produced it. No cost is involved for its creation. On the other hand, capital is not a free gift of nature. It is man made.
2) Land has no cost of production. But capital involves some expenditure.
3) Land and capital differ in their availability. While land is inelastic and unchangeable in supply, capital is elastic and changeable. The supply curve of land is inelastic. It is vertical to OX axis. On the other hand, the supply of capital is elastic. Its supply can either be increased or decreased as per the needs of the country.
4) Both differ in their continuity. While land is permanent and indestructible, capital has no such permanent existence. After some period it loses its form and existence.
5) Both also differ in their remuneration. The remuneration paid to land for its utilization is described as rent. On the other hand, the remuneration paid for the utilization of capital is known as interest.
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Answer:
Explanation:
In economics, capital refers to that of wealth which is used for further production of wealth. Land is the natural factor of production, it is permanent in nature. Capital is a man made factor of production. It lacks permanency.