Factors
of production are the resources used to produce goods and services. It is
classified into four
1) Land: It refers to all natural
resources on Earth. These are the resources provided by the nature. Example:
Natural fertility of soil, Minerals in the earth surface, forests, rivers,
riches in the sea etc.
We can find renewable resources and
non-renewable resources from land. Renewable:
This can be grown in some times again. Example: Trees etc., and
non-renewable: which once used is finished example: Gold, Oil etc.
The Price paid for Land is called
as Rent.
2) Labour (Human resources): Labour
refers to all types of human efforts, manual or non-manual, skilled or
unskilled which is done for a reward other than pleasure derived from it.
The reward for labour is wages or
salaries.
3) Capital: These are man made goods which helps to
produce many other goods and services. It can also be referred to money
invested by owner for the use of factors of production. Capital is used by
firms as it increases the output. Example factory building, machines, etc.
Capital
can be classified into two
o
Fixed
Capital: It refers to things which are long lasting and do not change their
form in the production process. Example factory building, machines, etc.
o
Working
Capital: This includes things which change their form in the production
process. Example: raw material, seeds, fertilizers, stock of leather, timber,
money for running expenses etc.
The
reward for capital is interest.
4) Entrepreneur: Entrepreneur is a
person or a group of people who use to take risk and responsibility of
employing land, labour and capital and direct them in the process of
production.
The
reward for Entrepreneur is Profit and loss.
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