Depending upon the availability of various items and the ultimate use of the product, numerous elements or agents, which in one way or the other help in accomplishing the production, are termed as ‘Factors of Production‘.
In simple words, the goods and services with the help of which the process of production is carried on are called factors of production. These factors are also called inputs.
Accordingly, anything which contributes to an output can be conveniently called as input or factors of production. There are basically four factors of production which are given below.
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(1) Land:
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Land is the most important factor of production. It is a free gift of nature. In everyday usage, by land we mean the surface of the earth. But in economics the word ‘land’ has a special meaning.
Besides surface of the earth, it also includes free gift of nature, such as forest resources, mineral resources, or anything that helps us in carrying out production of goods and services and is provided by nature free of cost.
(2) Labour:
Labour is an important factor of production and is capable of mobilising all other factors of production to achieve the desired output. In economics, labour refers to all kinds of exertion – manual (physical) or mental, skilled or unskilled, scientific or artistic – put in by human beings for gaining or achieving monetary benefits. All that works which is done for the sake of pleasure, love, kindness or charity cannot be called ‘labour’ in Economics.
(3) Capital:
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It is a produced means of production. It is a means of production because it helps in the production of wealth. Buildings, plants raw materials, machines, highways, ports etc are example of capital.
(4) Entrepreneurship or Organization:
It is a specialized human element related to ‘production’. The entrepreneur (organizer) plays an important role in modern times because it is the entrepreneur who takes up the risk and sets the entire productive machinery into motion. It is under his leadership that production goes ahead and business prospers.
