So what do you understand by the factors of
production?
The factors of production are also known as the
agents of production.
The factors of production are also known as
the resources of production.
They can be termed also as the means of production.
The factors of production are very important
because they are needed to produce a good
or a service.
So we need the capital.
We need the land.
We need the entrepreneur as well as labour
to be able to produce a good or a service.
So when we talk about the entrepreneur....
the entrepreneur is going to combine all the
factors of production to produce the product
and the reward for the entrepreneur is profit.
The entrepreneur is profit motivated.
So whatever he can do to reduce the cost of
production, he will do that.
He is more likely to reduce the cost of production
in order to make a profit and he will aim
at a profit at any cost.
And that is what businessmen usually they do.
And they try to engage themselves in research
and development activities to know more about
the tastes and preferences of consumers because
they are normally profit motivated and they
will not want the business to fail.
So, they carry out research and development activities
just to get a higher market share and to achieve
a good reputation as well as a goodwill which
is good for the business.
Now when we talk about the capital....what
do you understand by the capital?
When we talk about capital in Economics; capital
is not money.
Capital cannot be termed as money in Economics
because capital refers to equipment and machinery.
So these are needed to produce other goods
and services.
So the reward for capital is normally interest.
So when we talk about land; land refers to
all the natural resources that has been gifted
to mankind by nature...okay...so road is not
land...road is in fact capital.
This is the mistake that most students normally
do but why we say that road is normally....road
is normally capital?
Because it is a man-made thing.
It is something that has been created by other
human beings.
So we cannot term it as land.
So that is why we say that road is more likely to
be capital.
And land may be in terms of sunlight...may
be in terms of rivers....those things that
has been gifted to nature by mankind....these
are land.
And when we talk about labour.....labour refers
to the human effort needed to produce a good
or a service.
Normally you will find that workers, they
need a particular experience...they need a
particular qualification to get a job.
The more qualified you are, the more will
be your wage rate and the reward for workers
are more likely to be the wage rate.
