HOME Mathematics Computer Science Economics
Factors Of Production
Factors Of Production

Introduction
  • The factors of production are used in the process of producing goods and services.
  • There are 4 factors of production:
    1. Land
    2. Labor
    3. Capital Goods
    4. Entrepreneurship
  • These are often called 'producer goods and services'
    • As opposed to consumer goods and services, which are the result of production.
Land
  • Land may refer to physical space, such as farmland
  • But it can also be any natural resource, such as:
    • Water
    • Minerals and Ores
    • Fishing Areas
    • Sunlight
Labor
  • Labor is the human part of the production process
  • This means everyone, not just the frontline staff who work with the raw materials.
  • Labor can be classified as either physical or mental.
Capital
  • Capital refers to goods used to produce other goods and services .
  • There are two types of capital:
    • Fixed capital refers to one time purchases, such as tools and machinary .
    • Working capital refers to goods that are used during the production process, such as raw materials.
  • Infrastructure is also classified as a type of capital
    • This might include road networks, airports, docks and other methods of logistics and transport.
    • However it also includes other things necessary in the production process, such as power, water and communications systems (such as high speed internet).
Entrepreneurship
  • Entrepreneurship is a later addition to the factors of production.
  • Some economists classify it as a specialized form of labor, rather than seperating it into its own category.
  • Entrepreneurs combine the other factors of production together in order to make money.
  • Entrepreneurs are the drivers of innovation, and are responsible for economic growth.