Meaning of factors of production
Factors of Production can be defined as the basic resources or agents used for producing goods and services. Factors of production make it possible for goods to be produced in the required quantity and quality.
The factors of production are land, labor, capital and entrepreneur.
LAND: The land is a free gift of nature; it refers to the resources provided by nature to aid the production of goods and services. Examples of land are rivers, farmlands, seas, the fishes in them, forestry minerals such as coal, crude oil, iron etc. Others are the climatic conditions like rain, sunshine, animals etc.
Features of Land
The following points below are the features/ characteristics of land
- Land is immobile i.e the location of land cannot be changed, it is fixed.
- The value of land varies from one location to another.
- It is a free gift of nature
- The supply of land is limited
- The reward for labor is rent
LABOUR: Labour is the mental or physical efforts of man which is directed towards the production of goods and services. Examples of labor are the work of farmers, carpenters, teachers, policemen etc.
Features of Labour
- Labour is mobile i.e. can move from one location to another
- Labour controls other factors of production
- Labour has feelings
- Labour requires motivation
- Labour is not fixed
- Labour is a human factor
CAPITAL: Capital is defined as the man made assets used in production. It is the man made wealth used in the production of other goods. The reward for capital is “interest”
Features of Capital
- Capital is man made
- Capital is durable
- Capital exist in different forms
- It promotes division of labour
- Capital exist in different forms
ENTREPRENEURS: The entrepreneur is the person who combines the all other factors of production. He coordinates and directs the factors of production to produce goods and services.
Features of Entrepreneur
- The entrepreneur takes the risk in a business
- He coordinates and manages all the other factors of production
- The entrepreneur makes the decision in the organization
- Provides the capital
- The reward for an entrepreneur is “profit”
Test and Exercise
- The reward for land as a factor of production is (a) profit (b) interest (c) rent (d) interest
- The following are factors of production except (a) labour (b) land (c) industry (d) capital
- Which one of the following is a distinguishing feature of capital (a) it is created by man but set aside for future use (b) it is fixed (c) it’s reward is rent (d) it is a free gift of nature
- The manager of the business is referred to as (a) labour (b) adviser (c) entrepreneur (d) none of the above
- Which of the following is not a good example of land (a) gold (b) seas (c) rivers (d)bridge
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