Agricultural Science, S.S.S 1, Second Term

TOPIC: Production and Factors of Production


Production, in is one of the important activities whatever human being is received goods as a natural gift can not be consumed as such. It requires some processing and then and then only it is consumed. Through processing we transform some goods and services in to another one for example sugarcane into sugar, Cotton into cloth etc. In economics, sugarcane or cotton are termed as inputs factor or raw material while sugar or cloth are termed as output or finished product. Thus the term can be defined as under.

  1. Production means transformation of inputs (goods and sieves) into output.

  2. Production of wealth or value.

  3. Production means creation (addition) of wealth or value.

It may consist not only goods but also services.

Factors affecting  Production

The Following are the factors that affect production.

  1. Natural factors: like climatic conditions, soil type affect production. Production can be diminished due to natural calamities like flood, drought etc.

  2. Technical progress: Can positively influence production. Use of improved variety, fertilizers, insecticides etc. can give us more production.

  3. Political factors: also affect production positively or negatively. Decisions pertaining to taxation, investment or fiscal. Policies of Govt. influence production.

  4. Infrastructure facilities: Like transport, credit, storage etc. are also equally important to have more production.

  5. Character of people: determines productivity. The hard workers and sincere workers always produce more and hence it is very important factor which influences production.

Factors of Production

For undertaking production following important factors are required:

1. Land 2. Labour  3. Capital and 4. Organization or Enterprise


Dr. Alfred Marshall defined land is meant no merely land in the strict sense of the word, but whole of the materials and forces which nature gives freely for man’s aid in land, water, in air and light and heat.

Land stands for all nature, living and lifeless. It includes all natural resources that human being get free from air, water and land. In short, the terms ‘land’ refers all that nature has created on the earth, above the earth and below the earth’s surface.

Importance of Land: Land a factor of production is of immense importance. Land is the original sources of all material wealth. The economic prosperity of a country is closely linked with the richness of her natural resources. The quality and quantity of agricultural wealth a country depends on nature of soil, climate, rainfall. The agril products are the form the basis of trade and industry. Industry also depends upon availability of coal-mines or waterfall for electricity production. Thus all aspects of economic life i.e. agriculture, trade and industry are generally influenced by natural resources which is called as “Land” in economics. The importance of land is therefore too much as it is influencing finally the standard of living of the people.

Peculiarities of Land: Land as a factor of production is quite peculiar, it possess some importance feature, they are-

  1. Land is free gift of nature: Land is not produced or man-made resource (agent). Therefore, that we have to accept is as it is. It is after all free gift of nature.

  2. Land is limited in area: Land surface of the world is remaining unchanged. In Holland, some land has been reclaimed from the sea. But these efforts have produced a negligible result as compared with the total area already in existence.

  3. Land is permanent: Land as factor of production is not easy to destroy. The other factors are destructible but land can not be completely destroyed.

  4. Land lacks mobility: Land can not move bodily from one place to another. It lacks geographical mobility.

  5. Land is of infinite variety: Land is not man-made. Land is of infinite variety. For example, soil may be of different types, climate elements like temperature, rains received in different part is always varying.

Factors affecting productivity of land: Different pieces of land differ in quality or productivity. The productivity depends upon following factors.

  1. Natural factors: The factors like soil, climate, rainfall, topography influence the productivity. The sandy soil with low rainfall always yield less but it is not so in cause of black cotton soil. It always yields more.

  2. Human factor: Man is always trying his best how maximum output can be obtained from land. So many deficiencies are always tacked good yields. This human effort is very important to increase the productivity.

  3. Situation factor: The location of the land many a times determines the productivity. The fertile land in remote corner of the country perhaps may not be cultivated but the land having less fertility but located nearby marked can give a good yield.


It can be defined as any exertion of mind or body undergone partly or wholly with a view to earning some good other than the pleasure derived directly from the work.

In short labour in economic means that any type of work performed by a labourer with an intention to earn income.

Peculiarities of Labour: The important peculiarities of labour are as under.

  1. Labour is inseparable from the labourer: Here labour means a quantum of work performed while labourer means who perform the work (e.g. labour). Therefore, the labour’s work has to be delivered in person.

  2. Labourer sells his services not himself: If labourer is employed means an employer only pays in the form of wages on account of services received from the labourer. Thus labourer is only selling his services not himself.

  3. Labour is more perishable than other commodity: If time passes, it lapses forever. Therefore a day lost which out work means the days work gone for ever. That is why many times workers have to accept lower wages rather than earn nothing.

  4. Labourer has not the same power of bargaining as their employers. This is because labour can not be stored up and labourers are poor and ignorant.

  5. Man, not a machine: A labourer differs from machine. He can not render services like machine. After all labourer is man and he has feelings and likings. If good surrounding, health, recreation is provided, he can work efficiently otherwise he will not work efficiently.

  6. Less mobile: Generally labourer does not want to leave his home. It is therefore labour is such less mobile a compared to other factors.

  7. Supply Independent of its demand: The supply of labour is always independent of its demand and cannot be easily and quickly increased or decreased. If supply of labour is surplus, their numbers can be reduced only by a painful process of starvation. But when sudden increase demand for labour, as during war, wages will rise but supply can not be quickly increased.

  8. Labourer differs in efficiency: Like machinery every worker can not render same quantum of work labourer they very inefficiency and therefore wages differ from labourer to labourer.


Capital has been as that part of person’s wealth, other than land, which yields an income or which aids in the production of further wealth.

1) Capital and Wealth: The capital is required in production. In modern economy the production depends not only on land and labour but capital is also equally important. It is also important to note that if wealth is not used in production process it is not said to be a capital. For example, basically tractor is capital asset as it can be used in cultivation (production) of farm, but due to some reason the same is kept unused (idle) for one or two year it can not termed as capital for that particular year. It is only wealth. Thus, the unused wealth can not be considered as capital. Hence all capital is wealth but all wealth is not capital.

2) Money and Capital:
In the ordinary language, capital is used in the sense of money. No doubt money is wealth and part of wealth used in production is called capital. But here in production process money is not used as such and hence it can not be termed as capital. Only by using money we are purchasing capital assets and hence money itself is not capital.

3) Capital is produced means of Production: It is man made instrument of production. Just like land and labour, capital as factor of production is not original. Since it is man-made it is not freely available.

Characteristics of Capital:

1) Capital is man made factor of production.
2) It involves time element.
3) Capital may be fixed: i.e. it is durable use pre use producer goods e.g. machinery, well in agriculture.

It may be working:
i.e. it is single use producer’s goods e.g. seed, fertilizer in agriculture.

Function of Capital:

1) Supply of raw material: The working capital required in production process represents raw material.

2) Supply of appliances and equipment: The fixed capital goods.

3) Provision of subsistence: If capital is available to the poor person, he can utilize it and run his family very well. Supposes only 5 to 6 goats maintain by a poor person it will give him sizeable income to survive his family.

4) It also employment means of transport

5) Supply of employment: If ample supply of capital is made, it will enhance production which will in turn give employment.

Importance of Capital:

  1. In modern economy capital is very important factor of production which is essential to undertake production.

  2. Without capital other factors of production (like land, labour) will become handicap.

  3. On the contrary, if apple supply-capital is made the production and productivity can be increased substantially.

  4. The economic development of any country does not solely depend upon the available land and labour but how much capital is made available is also equally important.

  5. The under-developed countries remained, under-developed due to lack of capital.

  6. The ample supply of capital gives boost to production.

  7. When more production is there, more economic activities can he initiated and as a result, more employment opportunities can be created.

  8. More employment further helpful for minimizing the poverty or improving standard of living of the people.

Organization (Enterprise)

Organization of Enterprises means to plan a business, to start it and run it. It means to bring the factors i.e. land, labour and capital together to undertake a business or production process.

Organization implies not only running the business but also shouldering the loss, if any. The man who undertakes all this work is called as organizer or Entrepreneur.

Importance of Organization (Enterprise): Now a day, organization is very important as Production process has become too much complicated one. A small happening in the country or abroad influences the business. The organization if done properly the production process will not hamper. Hence proper planning and execution of business is necessary. In view of this the job of organizer becomes very important. Therefore whole time devotion of organizer is required for successful business. The other factors land is possessed by land owner, capital is possessed by capitalist and labourer is only ready to offer. They lay scattered hence these three needs to he combined and It is the job of organizer. Thus, organization would absent perhaps there would not be any production.

Functions of organizer (Entrepreneur): The following are the function of organizer.

1) Initiation: Taking the review of situation and availability of resources organizer initiates a business or production. Here planning of business is undertaken.

2) Organization: Organizer now combines the land, labour and capital resources and starts the business or production.

3) Direction and supervision: During the course of production proper direction and timely supervision is required. Thus, organize executes the business in a proper way.

4) Control: Organizer is keeping watch on changing situation. Because of changes in situation in respect of marketing, Govt. decision, etc. will hamper the business. Therefore control is also important.

5) Risk taking: Risk means uncertainty. It may be physical or market risk. The business can not be always in profit. Sometimes losses are required to accept. Risk taking is therefore becomes an important function of an organizer.

6) Innovation: A successful organizer is always innovative. He can introduce new method or commodity in the production process or in business.

Types of Business Organization:

1) Individual Enterprise: Business owned and run by single person.

2) Partnership: Business is owned and run by more than one but few persons. The number are too less and it is possible to know each other and combined action can be taken easily.

3) Joint-stock companies:  The owner members are large size and numerous. They do not know each other and hence the management of the business is done by few people i.e. Board of Directors e.g. Reliance company. It is always profit motive.

4) Co-operative Enterprise: The busines2s is run on co-operative principles. Members may be numerous but Board of Director is elected body which runs the business e.g. co-operative sugar factory.

5) Public Enterprise: The business is owned by Govt. Therefore Govt. decisions determine the success of business. Largely they are run, keeping in view the service motive e.g. Railway, HP and Bharat Gas etc.


  • What are the main factors of production

For more notes;see: https://passnownow.com/classwork-support/