JC Chandisingh Secondary School.
Grade 10B
Economic
FACTORS OF PRODUCTION
Factors of production are the economic resources that are used to produce goods and services.
There are four factors of production:
1. LAND
Land is all the naturally occurring free gifts of nature.
Land yield a factor reward of rent.
Characteristics
● Land is fixed in supply – the amount of the factor land is fixed
● Land has no cost of production for example preparing a plot of land for agricultural use
requires clearing and ploughing. However, it never costs society, as a whole, anything to
produce the land itself.
● Land is geographically immobile
Type of land
● The natural fertility of the soil that can be used to grow crops or build home, office and
factories.
● The mineral deposits such as bauxite, petroleum among others
● The seas and rivers
● Land above ground (gases in the atmosphere)
Importance
Land is an important factor of production. It is used in the production of almost all goods and
services
Productivity
Most of the problem s in economics, however, are not about the total supply of land, but the
supply of land for some particular use. This can be changed, since the same piece of land can
often be put to different uses. The supply of land for agriculture can be increased by reducing the
supply of land used for building.
LABOUR
This refers to the people who are available for work in the economy.
Characteristics
● Labour is the human factor – labour services are performed by man.
● Only the worker can sell his/her labour services – in the case of skilled labour, no one
else can perform his/her services.
● Labour services cannot be stored in the same way as capital
● Labour is geographically and occupationally more mobile than land.
● Labour is not homogeneous
Function
Labour performs an important function in the production process, since it ensures the completion
of goods and service. Human labour is need in the decision-making process. It yield wages as a
factor reward.
Productivity
This is the output per worker per period. For example, the productivity of a wood worker might
be 10 wooden tables per day. In other words, it is the amount of output one worker can produce
in a given period of time.
Efficiency
It is when labour is being used to produce one of the maximum possible combinations of goods.
Supply of labour
this is the total number of hours that they are willing to work in the supply of labour; for
example, 10 men each working 50 hours supply 500man-hours.
Supply of labour depends on three factors:
● The size of the population
● The proportion of the population willing to work.
● The number of hours worked by each individuals
Division of labour
This is where the production process is divided into a series of separate tasks.
Specialization
Specialization occurs when workers focus on a specific task and become skilled in that area.
Advantages of division of labour and specialization
● Increase in output
● Use of machinery
● Increase in productivity
● Employment opportunities
Disadvantages of division of labour and specialization
● Doing repetitive work might be boring and monotonous
● Stifles creativity
● Causes immobility of labour
CAPITAL
This refers to resources used by a business (machinery) for the production of goods and services.
Or any man-made goods used in production.
Or the goods that must be available first in order to produce other goods and services in the
future.
The factor reward received from capital is interest.
Characteristics
● Capital is man-made.
● Units of the same type of capital are homogeneous
● Mobility of capital varies with size and the job that unit of capital is meant to perform
● Capital is imported for other countries
Types of capital
● Working capital – is the raw materials and intermediate goods used in the production
process
● Fixed capital – comprises of the factories and machinery used in the production process.
● Social capital – (infrastructure) usually provided by the government.
● Human capital – consists of people’s abilities, knowledge and skills.
Accumulation
This is the increase in the capital stock of a country. For there to be capital accumulation, society
must consume less and save some income. Firms will borrow he funds saved to purchase more
capital.
Importance as a substitute for labour
Capital is important, as it is mow replacing labour in the workplace. The bottling process is
beverage companies are automated and so there is no or hardly any need for workers on the
production line.
ENTREPRENEURIAL TALENT
The function of production which is responsible for organizing the other three factors of
production. Or is shown by people when they combine the other factors of production to form a
business.
This factor of production yield profit as a reward.
Characteristics
● Is creative
● Must have a vision
● Persuasive
● Have motivation and should be able to motivate
● Have flesibility
Functions
● He/she combines all the other three factors of production in a profitable manner.
● The entrepreneur is bears the risk of production.
