Goods and Services Collage

Factors of production

Factory buildings as capital goods
Courtesy of Mike

Factors of production are various types of resources used in the production of goods and services. They are:

• Land (natural resource) - natural resources used in the creation of products, paid in economic rent, because they are simply irreproduceable.
• Labor - human efforts provided in the creation of products, paid in wage.
• Capital goods - human-made goods or means of production (including machinery, building and so forth) used in the production of other goods, paid in interest.

Income from exploiting the 3 production factors comprises the national income.

Capital and labor are active factors while land is passive. One can only shift capital and labor rather than land which is given limited, to get a production-factor combination, which is further reflected in the technology a firm employs to produce products and services.

Labor operates capital to produce. The ratio of labor over capital is a major decision almost all firms must make. In the decision process, decision makers must understand that neither too much labor per unit of capital nor too much capital per unit of labor is acceptable since either way efficiency is not achieved. The 2 factors must come around someplace that both of them contribute equally to the final economic value realized.

Factors of Production

The reason people cannot satisfy all their wants and needs is the scarcity of productive resources. These resources or factors of production are called land, labour, capital, and organization or entrepreneurship. They provide the means for a society to produce and distribute its goods and services. As an economic term land means the gifts of nature or natural resources not created by human efforts. They are the things provided by nature that go into the creation of goods and services. Land has a broad meaning. It is not only land itself, but also what lies under the land (like coal and gold), what grows naturally on top of the land (like forests and wild animals), what is around the land in the seas and oceans and under the seas and oceans (like fish and oil). It includes deserts, fertile fields, forests, mineral deposits, rainfall, sunshine and the climate necessary to grow crops. Because there are only so many natural resources available at any given time, economists tend to think of land as being fixed or in limited supply. There is not enough good farmland to feed all of the earth's population enough, sandy beaches for everyone to enjoy, or enough minerals to meet people's expending energy needs indefinitely.
The second factor of production is labour — people with all their efforts and abilities. Unlike land, labour is a resource that may vary in size over time. Historically, factors such as population growth, immigration, famine, war and disease have had a dramatic impact on both the quantity and quality of labour. Labour is the human input into the production process. It may be mental or physical. But in many tasks it is necessary to combine mental activity with physical effort. The price paid for the use of labour is called wages. Wages represent income to workers, who own their labour. Land and labour are often called primary factors of production. It is one whose quantity is determined outside the economy.
The third factor of production is capital — the tools, equipment and factories used in production of goods and services. It is a produced factor of production, a durable input which is itself an output of the economy. For example we build a textile factory and use it to produce shirts or assemble a computer and then employ it in educating students. As noted earlier, such items are also called capital goods. This is to distinguish them from financial capital, the money used to buy the tools and equipment used in production. Capital is unique in that, it is the result of production. A bulldozer may be an example of capital goods used in construction. At the same time, it was manufactured in a factory which makes it the result of earlier production. When the three inputs — land, labour and capital — are present, production or the process of creating goods and services, can take place. Even the production of the service called education requires the presence of land, labour and capital.
Entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services, is the fourth factor of production. The entrepreneur brings together the other three factors of production — land, labour and capital. When they are successful, entrepreneurs earn profits, the return or reward for the risks, innovative ideas and efforts put into the business. When they are not successful, they suffer losses.

 

 

Factors of Production: Capital and Labour Factors of production arc resources used by firms as inputs for a good or service to be produced. Factors of production are as follows: capital, labour, and natural resources. In economic theory, the term "capital" refers to goods and money used to produce more goods and money. Classifications of capital vary with the purpose of the classification. The most general distinction is the one made between physical, financial, and human capital. Physical capital is land, buildings, equipment, raw materials; bonds, stocks, available bank balances are included in the financial capital. They both make great contribution to production. To group capital into fixed capital and circulating capital is common practice. The former refers to means of production such as land, buildings, machinery and various equipment. They are durable, that is, they participate in he production process over several years. Circulating capital includes both ion-renewable goods, such as raw materials and fuel, and the funds required o pay wages and other claims against the enterprise. Non-renewable goods TC used up in one production cycle and their value is fully transferred to the final product. Human capital is knowledge that contributes "know-how" to production. It is increased by research and disseminated through education. Investment n human capital results in new, technically improved, products and production processes which improve economic efficiency. Like physical capital, human capital is important enough to be an indicator of economic development of a nation. It is common, in economics, to understand labour as an effort needed to satisfy human needs. It is one of the three leading elements of production. Labour has a variety of functions: production of raw materials, manufacturing of final products, transferring things from one place to another, management of production, and services like the ones rendered by physicians and teachers. One can classify labour into productive and unproductive. The former produces physical objects having utility. The latter is useful but does not produce material wealth. Labour of the musician is an example. Unlike other factors of production, for example capital, once workers are employed, their efficiency can vary greatly with organization of work and their motivation. Demand for labour is influenced by the demand for goods produced by workers, the proportion of wages in total production costs, etc. The supply of labour depends upon the size of population, geographic mobility, skills, education level (human capital), etc. Workers supply labour either individually or through trade unions. If demand for and supply of labour are not in equilibrium, there is unemployment. The rate of unemployment is a percentage of the total labour force without a job. It is desirable for an economy to have the lowest possible unemployment rate and to achieve higher employment as neither full use of resources nor maximum level of output can be achieved in an economy having unemployment. Factors of production are combined together in different proportions in order to produce output. It is assumed in economics that one should choose the combination of factors which minimizes the cost of production and increases profits. The third factor of production, natural resources, poses too many economic problems3 to be discussed here. We will analyze them in the following unit. Факторы Производства: Капитал(столица) и Труд Факторы производства образовывают дугу ресурсы, используемые фирмами как входы для хорошего или обслуживание(служба), которое будет произведено. Факторы производства следующие: капитал(столица), труд, и природные ресурсы. В экономической теории, срок(термин) "капитал("столица") обращается(относится) к товарам, и деньги имели обыкновение производить большее количество товаров и денег. Классификации капитала(столицы) изменяются с целью классификации. Большинство общего различия - то сделанное между физическим, финансовым, и человеческим капиталом(столицей). Физический капитал(столица) - земля, здания, оборудование, сырье; обязательства, акции(запасы), доступные балансы банка включены в финансовый капитал(столицу). Они оба делают большой вклад в производство. К капиталу(столице) группы в установленный капитал(столицу) и оборотный капитал(столицу) - общая(обычная) практика. Прежний обращается(относится) к средствам производства типа земли, зданий, машин и различного оборудования. Они длительны, то есть они участвуют в нем, производство обрабатывает в более чем нескольких годах. Оборотный капитал(столица) включает, и возобновимые ионом товары, типа сырья и топлива, и фонды требовали заработной платы платы o и других требований против предприятия. Невозобновляемые товары TC исчерпанный в одном цикле производства и их ценности полностью переданы(перемещены) конечному продукту. Человеческий капитал(столица) - знание, которое вносит "умение" в производство. Это увеличено на исследование и распространено через образование. Инвестиция n человеческий капитал(столица) кончается новым, технически улучшенным, изделия и процессы производства, которые улучшают экономическую эффективность. Подобно физическому капиталу(столице), человеческий капитал(столица) достаточно важен быть индикатором экономического развития нации. Это общее(обычно), в экономике, понимать труд как усилие, необходимое, чтобы удовлетворить человеческие потребности. Это - один из трех ведущих элементов производства. Труд имеет разнообразие функций: производство сырья, производство конечных продуктов, вещи передачи от одного места до другого, управление производства, и услуг подобно тем предоставленным врачами и преподавателями. Можно классифицировать труд в производительный и непроизводительный. Прежний производит физические объекты(цели), имеющие полезность. Последний полезен, но не производит материальное богатство. Труд музыканта - пример. В отличие от других факторов производства, например капитал(столица), однажды рабочие используется, их эффективность может измениться очень с организацией работы и их побуждения. Требование(спрос) на труд - под влиянием требования(спроса) на товары, произведенные рабочими, пропорция заработной платы в полных издержках производства, и т.д. Поставка труда зависит от размера населения, географической подвижности, навыков, уровень образования (человеческий капитал(столица)), и т.д. Рабочие снабжают труд или индивидуально или через профсоюзы. Если требование(спрос) и на поставку труда не в равновесии, есть безработица. Норма(разряд) безработицы - процент от полной рабочей силы без работы. Это желательно для экономики(экономии), чтобы иметь самый низкий возможный уровень безработицы и не достигать более высокой занятости ни как полное использование ресурсов, ни максимальный уровень продукции(выпуска) может быть достигнут в экономике(экономии), имеющей безработицу. Факторы производства объединены вместе в различных размерах, чтобы производить продукцию(выпуск). Это принято в экономике, что нужно выбрать комбинацию факторов, который минимизирует стоимость производства и увеличивает прибыль. Третий фактор производства, природных ресурсов, излагает слишком много экономического problems3, который будет обсужден здесь. Мы анализируем их в следующей единице.

 

Игры по теме

Team Challenge

o Split your class up into two teams. Draw a chart illustrating the four factors of production on the board, with the headings: Labor; Land; Capital; Entrepreneurship. Have pre-written index cards prepared in a basket with various words on them, such as apple, meadow and car. Choose someone to begin. Instruct the student to pull a card from the basket and write the word beneath the correct heading. If she is correct, her team gets the point. Offer both teams rewards for playing or offer just the winning team a reward, based on age-appropriateness.

Classifying Terms

o For a simple activity where the students can better classify factors of production terms, ask students to draw a chart on a piece of paper. Instruct them to label sections with four titles: Land; Labor; Capital; Non-applicable. Ask each student to think of an item or a word. Write that word, such as teacher, lake or factory, on the board. After each student has stated a word, instruct the students to quietly place each word inside each of the correct areas on their charts. Review the words and the correct placements of the items together. This activity works best for elementary students.

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Candy Bar Time Line

o This lesson works best for 10th grade and up. Place a mini-candy bar on the desk of each student. Ask the student to not touch or eat the candy bar while you discuss on the overhead projector or interactive whiteboard everything that went into making that candy bar, such as the idea, the sugar, machinery, electricity, gas, and trucks to haul the candy to the stores. Explain the definitions for the four factors of production: land; labor; entrepreneurship; capital. Instruct the students to draw a time line of the creation of the candy bar on white paper or poster board, from the idea to the moment it landed on the student's desk. Ask them to use one color for each factor of production. Students may eat the candy bar as they work.

Goods and Services Collage

o This activity calls for poster board, markers and glue. Divide your class into small groups of four. Instruct students to cut pictures of items out of newspapers and magazines and glue them underneath headings in a chart that they draw themselves. The headings need to illustrate the four factors of production; labor, capital, entrepreneurship and land. This activity can be done with almost any age group.

Read more: http://www.ehow.com/info_7942250_classroom-activities-factors-production.html#ixzz2e51pDT1U

 

Factors Defined

o The first of the factors is land. In traditional business, a company can't operate without a production location. Furthermore, the type of land dictates the ability to find resources, move product and be protected. This factor doesn't apply so much today to businesses that function over the Internet, but even electronic commerce still needs a secure place to house its servers. Next comes labor. Human input is crucial for any tasks that require decision-making, and the bigger a business gets the more employees it needs. Third is capital. Investment and capital equipment are both necessary to ensure significant production. The fourth factor involves enterprise. This element represents the creative zeal of a company that allows it to produce goods or services people want. For example, much of Apple's modern success is attributed to Steve Jobs' creativity in seeing new markets.

Importance of the Factors

o From an economics perspective, every business must have the four elements in place for production to occur. There are no exceptions. Again, e-commerce seems to break this rule, not requiring a brick-and-mortar location. However, in reality even website-only businesses require their data to be saved somewhere on someone's computer physically. Also, it's not enough to have the four factors available; they must also be balanced. Too much labor and not enough space to house employees creates inefficiencies. Plenty of ideas and people but no capital investment means a business won't be able to grow exponentially. Each element needs to match the demands of the other for the business to expand with profit.

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Ongoing Maintenance

o A business must also pay attention to keeping a supply of capital, labor, ideas and logistics available regularly. Many of the production factors are consumable. This means they have a finite life and get used up or committed to full capacity. To keep the business going as well as growing, more resources for production are needed. This aspect can limit a business from expanding into new markets while competitors race ahead and grab valuable customers.

Supply Matters

o What doesn't get mentioned about factors of production is that they have to come from somewhere. Economics treats this fact as another business transaction, but for a business, maintaining good supply streams is critical. Factors can't be guaranteed or maintained without a supplier to provide them. And, if a supplier chooses to stop providing, a business can be quickly cut off from the production factors it needs. Automakers are keenly aware of this dependence on their part suppliers, knowing a cutback could shut down an entire assembly line of a specific car model.

Read more: http://www.ehow.com/info_8502269_factors-production-important-economics.html#ixzz2e52LtGlU

 

Karl Marx’s Outline of the Critique of Political Economy (Grundrisse)