4 Factors of Production
4 Factors of Production
4 Factors of Production
Factors of production means inputs and finished goods means output. Input decides the quantity of output
i.e. output depends upon input. Input is the starting point and output is the end point of production process
and such input-output relationship is called as "Production Function".
All factors of production like land, labour, capital and entrepreneur are required altogether at a time to
produce a commodity. In economics, production means creation or an addition of utility.
Factors of production refers to inputs required for conducting production. Input is the starting point of every
production activity.
According to Prof. Benham, "Anything that contributes towards output is a factor of production."
Mere existence of anything doesn't make it a factor of production but its contribution in production process is
a necessary condition. Dr. Alfred Marshall described factors of production as "Agents of Production".
Cooperation among factors is essential to produce anything because production is not a job of single factor.
Four Factors of Production In Economics - Chart
Following chart provides brief tabulated information on 4 factors of production.
4 FACTORS OF PRODUCTION
1. Land is a Natural & Primary Factor of
Production
Land is not created by mankind but it is a gift of
nature. So, it is called as natural factor of
production. It is also called as original or primary
factor of production. Normally, land means
surface of earth. But in economics, land has a
wider meaning. Take a good look at the following
picture :Land includes earth's surface and resources
above and below the surface of the earth. It
includes following natural resources :On the surface (e.g. soil, agricultural land, etc.)
Below the surface (e.g. mineral resources, rocks,
ground water, etc.)
Above the surface (e.g. climate, rain, space
monitoring, etc.)
Peculiarities / Characterisitcs / Features of Land
1. Land is a free gift of nature
Land is a free gift of nature to mankind. It is not a
man-made factor but is a natural factor.
2. Land is a primary factor of production
Though all factors are required for production,
land puts foundation for production process.
Starting point of production process is an
acquisition of land. So, it is a primary factor.
3. Land has perfectly inelastic supply
producing
labour
cannot
be
FEATURES OF CAPITAL
The characteristics or features of capital are:1.Man-made Factor : Capital is not a gift of nature.
So it is not a primary or natural factor, it is made
by man in capital goods industry. It is secondary
as well as an artificial factor of production.
2.Productive Factor : Capital helps in increasing
level of productivity and speed of production.
3.Elastic Supply : Supply of capital depends upon
capital formation process. Capital formation
depends upon savings and investment. By
accelerating capital formation, capital supply can
be increased. But it is a long term process.
4.Durable : Capital is not perishable like labour. It
has a long life subject to periodical depreciation.
5.Easy Mobility : Movement of capital from one
place to another is easily possible.
6.Is a Wealth : Since capital has all features of
wealth viz. utility, scarcity, transferability and
externality, capital is a wealth but wealth doesn't
necessarily become capital.
7.Derived demand : As a factor of production,
capital has a derived demand to produce finished
goods which have a direct demand. e.g. demand
for raw cotton is derived from demand for cotton
cloth.
8.Round about production : Capital goods doesn't
satisfy our wants directly. But resources should be
diverted towards production of capital goods first.
And thereafter such produced mean can be used
to produce consumer goods having direct
demand.
organises
the
factors
of
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