It includes all naturally-occurring resources such as soil, water, air, plants, etc. They are very important for making stuff and without them, goods would never be made and services would never be provided.Land as a factor of production is sometimes also referred to as natural resources. These are what two of the factors of production – Land and Labor, basically are. Labor is basically what is needed to ensure the production process gets completed. Different kinds of labor is important or we could not make all this different stuff. Without the cashier, no one would take our order at McDonald’s and we would be left hungry. Without them, goods would not be made, and services would not be provided. The cashier in McDonald’s, the workers in factories, the people at the movies and in the bank, are all labor. In the bank, there are people to help us with our questions. When we go to watch a movie, there are always people who guide us to our seats. In factories, there are always people who assemble the products. There is always a cashier behind the counter to take the order. When we go to McDonald’s to buy a burger, we go to the counter to make the order and pay the money. He cannot just wait for the Maggi to automatically get made. In the same way, Mridul will need to make the Maggi with his own hands for it to be cooked. These people will help him make the toy car and sell it to other people. For John to make the toy cars, he will need to hire people. Even when land has been bought, nothing can be produced if there is nothing else. Now, we shall move on and start discussing labor. This is why Land is the first thing that is needed to start production. Without any of this, John will not be able to start his factory. But the most important thing he needs is Land. He will need many things to start building his cars. In John’s example, let’s say that John wants to start a factory of toy cars. Land is the first and most important resources to make anything. Land in economics covers everything from soil, rivers, oceans, forests, mountains, deserts, waters, rain, air, sun, moon etc. are all found under the surface of the earth. ![]() Land even talks about what is below the surface of the Earth. ![]() The surface of the earth is covered under land but so are other things. They are there from before and exist only as a gift of nature. They also mean that they are free gifts of nature. Land, in economics, talks about all the natural resources of Earth. In economics, land covers many other things as well. When people speak of land, they only mean the surface of the Earth. Since, capital and intellectual capital are more difficult to understand, they will be covered at a higher level. Intellectual Capital (Entrepreneurship)įor this article, we will be discussing the two simpler ones – land and labor.There are usually four types of factors of production: For Mridul, the factors of production are everything that needs to cook the Maggi. For John, the factors of production are everything that he needs to make the car. These are the factors of production that they need to make what they want. Mridul needs a Maggi packet, a pan, and water. John needs plastic, batteries, antennae, tires etc. Without them, Mridul will not be able to cook and eat the Maggi.įactors of production are all the things that are needed to make something. Only when Mridul has all of these things can he cook the Maggi. He will need a pan and he will need water so that he can cook the maggi. To make the Maggi he will need to buy a packet of maggi. A boy, Mridul, wants to cook and eat Maggi. Plastic, batteries, antennae, tires and many other things will be needed by John to build the car. ![]() As you can see, John will need many things to build the toy car. John will also need to buy small tires so that the car can move. He will need an antenna for the car and remote to connect. To run the toy car, batteries will be needed. What could these things be? John wants the toy to be made of plastic. To make the toy, he will need to collect and join different things. He cannot make the toy car out of nothing. ![]() First, let’s ask the question – What does ‘Factors of production’ mean? Let’s answer this. The two most basic factors of production will be discussed – land and labor. In this text, the topic of discussion will be factors of production. Labour, on the other hand, is the work done by people. Capital the amount invested by the owner in his or her business and intellectual capital means humans, connections, and intelligence. To make a commodity and earn profit a business enterprise has to employ these factors of production. The land is all the free available resources provided by nature. There are usually four types of factors of production- land, labour, capital, and intellectual capital or entrepreneurship. Factors of production are all the things that are needed to make a commodity.
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