4 Factors of Production

In economics, factors of production can be defined as the resources which are employed so as to produce the desired goods and services. There are basically 4 factors of production to produce goods and services, they all have one thing in common and it is that their supply is limited. Let’s look at them one by one –

1. Land – It includes all things which are related to land such as minerals, gas, oil, flora, fauna etc… which can be used for further production of goods and services.

2. Labor – Next factor of production is the labor which refers to the human effort that go into making of products, it also includes the effort which go into selling or marketing of goods and services. In other words it includes work of all human beings whether it is a doctor, salesman or person doing labor work.

3. Capital – Capital does not mean only money but it also includes machinery, tools, factories etc… which helps in the production of goods and services. It can be of two types one is physical capital which is machines, factories etc… and the other is human capital which is the training of workforce done by companies or degrees taken by individuals.

4. Entrepreneurship – This is the factor of production which brings all other factor of productions together. It is entrepreneurs that take the risk of starting a business which ultimately result in production of either goods or services. It is them who see how to utilize all other three factors of production in such a way so as to produce maximum output with minimum of input and hence achieve efficiency in producing the goods and services.

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