Production(ii)Factors of Production.

Factors of ProductionThe resources used in the production of goods

and services are classified into the following categories

LANDLABOURCAPITALENTREPRENUER

LandLand refers mainly to the resources provided by nature, e.g. Soil, sunshine, rain, minerals, forests, and fishing grounds.

Characteristics It is completely immobile i.e. it is geographically fixed.It is fixed in supply – its quantity can not be increased.It is the gift of nature – i.e. it has no cost of production as man did nothing to bring it into existence.Its value varies with its location- land in urban areas commands a higher price than land in rural areas.

Land cont’dIt is liable to the “law of Diminishing

marginal Returns”.

Economic Importance of Land i. Land provides the site necessary for

production.ii. The natural raw materials needed for

production.

Reward for Land is called ...........

LabourLabour is all effort of man both physical and

mental, made by human beings in productionCharacteristicsThe quality of labour refers to whether

labour is skilled, semi-skilled or unskilled Quantity of Labour: the size of a country’s

labour force (working population) depend on the country’s total population, school leaving age, retirement age, etc.

Importance of Labour

Without human effort Production is not possible.

Even in mechanised production, some effort of man is still required for production to take place.

Reward for land is ...................

Law of Diminishing Returns

CapitalCapital is defined as wealth set aside for the

creation of more wealth.Capital can also man- made resources used in

the production of other goods and services. Capital is required for the production of both

consumer goods and capital goods.

Types of GoodsConsumer goods are goods which are directly

need to satisfy consumer wants e.g.ipod, a pair of jeans etc.

Producer goods are used for the production of other goods e.g.machinery, factory building e.t.c.

Types of capital.Fixed Capital involves all producer goods

which are very durable and do not change their form after production. E.g. machinery, tools etc.

Working capital also called circulating capital refers to goods that are required regularly for production and which change forms entirely after production. E.g. raw materials like wheat change its form to flour which is further used for making bread, pizza, meat pie, doughnut etc.

Reward for Capital is ...............

Economic Importance of CapitalCapital is very important for the following

reasons:It increases production.New products and innovation. More variety.Increased standard of living.Improves efficiency of other factors of

production.

Entreprenuer