Factors of Production
The objective of any economy is to produce goods and services.
The more goods and services a country produces, the more income the country generates.
Then, why can’t we produce more goods and services? What are the requirements for the
production of goods and services?
What are the factors of production?
Factors of production are those inputs used in the production process to produce the outputs
(finished goods and services).
Factors of production are the resources used by people to produce goods and services.
There are mainly four factors of production. They are (1) Land (2) Labour (3) Physical Capital
and (4) Human Capital.
Every production is organised by combining land, labour, physical capital and human capital,
which are known as factors of production.
1. Land (Natural Resources)
The first factor of production is land.
However, in economics, by land, we mean all that is given to us free by nature.
This includes not just land, but anything that comes from the land.
Most of the natural resources like soil, water, forests, minerals, petroleum, sunlight, wind etc
come under the category of land – the first factor of production.
Note: The income that the owners of the land earn in return for land resources is called rent.
2. Labour (Human Resources)
While natural resources are one factor of production, human resources are another.
The second factor of production – Labour – includes all efforts of human beings used for the
production of goods and services. Labour include physical and mental labour.
The objective of any economy is to produce goods and services.
The more goods and services a country produces, the more income the country generates.
Then, why can’t we produce more goods and services? What are the requirements for the
production of goods and services?
What are the factors of production?
Factors of production are those inputs used in the production process to produce the outputs
(finished goods and services).
Factors of production are the resources used by people to produce goods and services.
There are mainly four factors of production. They are (1) Land (2) Labour (3) Physical Capital
and (4) Human Capital.
Every production is organised by combining land, labour, physical capital and human capital,
which are known as factors of production.
1. Land (Natural Resources)
The first factor of production is land.
However, in economics, by land, we mean all that is given to us free by nature.
This includes not just land, but anything that comes from the land.
Most of the natural resources like soil, water, forests, minerals, petroleum, sunlight, wind etc
come under the category of land – the first factor of production.
Note: The income that the owners of the land earn in return for land resources is called rent.
2. Labour (Human Resources)
While natural resources are one factor of production, human resources are another.
The second factor of production – Labour – includes all efforts of human beings used for the
production of goods and services. Labour include physical and mental labour.
