What are the factors of production and examples
Factors of production
Aug 21, · Factors of Production, the Four Types, and Who Owns Them. The Bedrock of the Economy. By. Kimberly Amadeo. Reviewed by. Thomas J. Brock. Updated August 21, Image by Brianna Gilmartin © The Balance Land as a Factor of Production. Labor as a Factor of Production. Capital as a Factor of. Apr 01, · As a factor of production, land can take on various forms from raw property to commercial real estate. Land is considered a primary factor of production because it can help generate economic value—for example, because farmers use land to cultivate crops and sell them, land has increased value and utility on the market.
Factors of productionterm used by economists to denote the economic resources, both human and other, which, if properly utilized, will bring about a flow or output of goods and services.
Thus, if the input is scarce in relation to the need for it, it is regarded as a factor of production. The needed inputs may be scarce, and so constitute productive factors, either because they represent something which cannot be produced, like land in the strictly economic senseor because although their supply could be enlarged, like factories, to do so would be costly in terms of resources.
The productive factors are commonly classified into three groups: landlabourand capital. The first represents resources whose supply is low in relation to demand and cannot be increased as the result of production.
The income derived from the ownership of this factor is known as economic rent. The factor of labour represents all those productive resources that can be applied only at the cost of human effort. The wage or salary is the form of payment for the use of this factor. The effort which the economist regards as qualifying may be either manual or mental, although in earlier periods, and apparently under communismmanual labour alone was considered a productive factor.
The final category, capital, is a more complex one. The owners of capital receive their income in various possible forms; profits and interest are the usual ones.
It is also supposed that in some degree one kind of factor can be substituted for another in production. The study of the level of factor employment, of the specific direction of their employment, and of the rewards received for their use constitutes what position does thierry henry play great how to address wedding place cards of economics.
Factors of production. Additional Info. More About Contributors Article History. Print Cite verified Cite. While every effort has been made to follow citation style rules, there may be some discrepancies.
Please refer to the appropriate style manual or other sources if you have any questions. Facebook Twitter. Give Feedback External Websites. Let us know if you have suggestions to improve this article requires login.
External Websites. The Editors of Encyclopaedia Britannica Encyclopaedia Britannica's editors oversee subject areas in which they have extensive knowledge, whether from years of experience gained by working on that content or via study for an advanced degree See Article History. Read More on This Topic. Get a Britannica Premium subscription and gain access to exclusive content. Subscribe Now. A justification was found in the fact that land, unlike…. History at your fingertips.
Sign up here to see what happened On This Dayevery day in your inbox! Email address. By signing up, you agree to our Privacy Notice. Be on the lookout for your Britannica newsletter to get trusted stories delivered right to your inbox.
Books by Tejvan Pettinger
The productive factors are commonly classified into three groups: land, labour, and capital. The first represents resources whose supply is low in relation to demand and cannot be increased as the result of production. The income derived from the ownership of this factor is known as economic rent. The factor of labour represents all those productive resources that can be applied only at the cost of human effort. Jul 04, · 4 Factors Of Production 1. Land: In Economics, land refers to all natural resources-like climate, rivers, oceans, forests, mountains and minerals etc. 2. The Basics of Factors of Production. Land as a Factor. Land has a broad definition as a factor of production and can take on various forms, from agricultural land to commercial real Labor as a Factor. Capital as a Factor. Entrepreneurship as a Factor.
The modern economists classified factors of production into two groups namely land and labor. In this connection it is appropriate for us to know the meaning of the 4 factors of production. Land: In Economics, land refers to all natural resources-like climate, rivers, oceans, forests, mountains and minerals etc. Labor: In Economics labor refers to any work, whether manual or mental, which is undertaken for monetary purpose.
At the same time the work done for the sake of love or happiness without expecting or getting any monetary benefits is not considered labor.
Capital : Capital helps to increase the production of wealth, machinery, money, buildings etc. It is the entrepreneur who engages the services of different factors in the production process. He prepares plans for establishing and maintaining the industry. He also decides the nature of methods to be employed in production. In this way the classical economists considered that production is the result of combined efforts of the four factors.
The classification as mentioned above has been subjected to serve criticism by several economists. Some economists like Benham considered that there are only two factors of production namely land and labor. They considered that land and labor are the two original factors. They believed that capital is man made. It is the result of the efforts made by laborers on land. Besides they stated that organization is a part of labor. Karl Marx, the father of Scientific Socialism, expressed the view that labor alone is the factor of production.
All others are secondary to labor. Land, capital and organization in the absence of labor remain idle and useless. He stated that it is the labor that decides the volume of production in a country. Some economists considered that the are only two factors namely Nature and Man. While land and capital are treated as components of nature, labor and organization are viewed as the contribution of man.
As land is considered a free gift of nature and capital is the yield coming from land and other natural resources, both the factors come under the category of Nature. Similarly, laborers are those persons who render services in a productive enterprises for some monetary income. Organizers are those who run the productive enterprise. That is why these economists considered Nature and Man as the two factors of production. The above criticism or traditional classification of 4 factors of production is not perfect and real.
The argument that labor and organization as one category and land and capital as another category is not correct. Land and capital are not the same. They differ from one another. While land has no cost of production, capital involves some financial investment. While land is a free gift of nature, capital is man made. Similarly, it is not proper to consider labor and organization as one factor.
The nature of functions and responsibility of the two factors differ from one another. The laborers simply render their physical or mental labor in production process. But the entrepreneurs take risk and bear uncertainty in organizing production. They make innovations, adopt new techniques and face unforeseen conditions. Laborers are not expected to face all these troubles. Hence labor and organization are not one and same. Therefore, the classification of 4 factors of production as given by the classical economists has been widely accepted as a rational and reasonable one.
Knowledgiate Team July 3, 7,, 3 minutes read. Show More. Facebook Twitter LinkedIn Pinterest. Related Articles.
Facebook Twitter LinkedIn. Close Log In. Adblock Detected Please consider supporting us by disabling your ad blocker.
<- What is the meaning of inextricable - What states make up the rocky mountain region->