Factors of ProductionThe various elements used to produce goods and services are considered the factors of production. There are four main factors of production that go into the process: Show
Various Other Possible Factors of Production
Factors of Production ExamplesExamples of Land/Raw Materials
Human Resources (Labor)
Man-Made Resources (Capital)
Entrepreneurs ( People responsible for bringing together the factors of production)
Examples of combining Factors of ProductionExample: Tea An entrepreneur buys the land needed to produce tea. It’s important to select land in the right regions to encourage the growth of tea plants. The company will then need to employ workers who can cultivate and care for the tea and those who can harvest tea leaves. The entrepreneur will invest capital into the project through the purchase of farming tools, harvesting tools, baskets, and vehicles for delivering harvested crops to the market. This industry is considered “labor-intensive” since a large portion of the funds is used for labor. Example: Processed Foods The entrepreneur will need to acquire land for the factory. A significant amount of capital will be needed for machinery and tools needed to combine raw ingredients to create the final food products. Larger factories will also need an adequate workforce to operate machines needed for production. This type of industry is complex and requires technological innovations and workers who can perform a variety of tasks. This industry is considered to be “capital-intensive” because of the large percentage of costs. Example: New Technology Industries that work with new tech like software development companies will need human capital. They’ll need to invest in people with specific skills and those who have the experience, expertise, education, and skills to develop technology. However, in this industry, purchasing land is not always necessary as workers can often work from home. The Factors of Production and Diminishing ReturnsLooking at economics on a basic level, it is assumed there are two primary types of factors of production a firm must consider. These are capital and labor. When a firm hires more labor but the capital is fixed, eventually the firm will experience diminishing returns. In other words, at some point, hiring more workers doesn’t increase output and returns are diminished. Which of these would not be considered a factor of production?Money is not considered as a factor of production. Money is medium of exchange and hence it cannot help to increase the productivity of an economy like other factors of production, thus the factors of production are Land, Labour, Capital and Entrepreneurship.
Who are the suppliers in the product market?A supplier is a person or business that provides a product or service to another entity. The role of a supplier in a business is to provide high-quality products from a manufacturer at a good price to a distributor or retailer for resale.
In which markets are factors of production such as labor capital natural resources and entrepreneurial ability traded?Product markets are markets for goods and services, such as computers and medical treatment. Factor markets are markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability.
Which of the following is the best example of a scarce factor of production?Land is the scarce factor of production. Other scarce factors include labor, capital, and entrepreneurship.
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