Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

Thursday, 10 November 2011

Factors of Production

Factors of production

Factors of production are the basic resources used in the production process in order to produce economic goods and services. Economists have classified the factors of production into four groups namely:

                           i.                  Land

This is free gift of natures either on the surface or in the earth. The value based on quality and location. Return to the land is fees. Examples are land, air, water, forest and others.

                         ii.                  Labour

The services contributed by people in the production process that involve both mental and physical effort. That’s include the skill and unskillful. Return to the labour is wages. Examples are lectures, construction workers and others.

                       iii.                  Capital

Human made resources which are used in the production process to produce other goods and services. Return to the capital is interest. Examples are machinery, raw material, buildings, tools and others.

                       iv.                  Entrepreneurship

This human creation is including the tools, machinery, and raw material is uses in production process. Return to the entrepreneurship is profit.