Factors of production simply means the resources or inputs used for producing goods and services. They are land, labour, capital and entrepreneur.
is referred to as a gift of nature. It covers farmland, forest, Rivers, Deserts and mineral resources.
FEATURES OF LAND
- Land is fixed: It is not easily increased nor decreased in supply but its quality can be improved.
- Land is a gift of nature: it s not created artificially. Therefore, it has no cost of production.
- Land is subject to the law of diminishing returns.
- Land is geographically immobile.
is simply defined as all human resources both mental and physical efforts used in the production process. Under labour, we have the skilled (Lawyers, Doctors, Engineers Teachers) etc and the semi-skilled labour like Clerical officers, WAEC holders teaching in primary/secondary schools. Finally, we have the unskilled labour like the messengers, cleaners, labourers. This group hardly undergo any formal training.
is the store of wealth used for the production of further wealth. It is referred to as real money [i.e Naira and kobo] or physical goods such as tractors, machines, vehicles etc.
CHARACTERISTICS OF CAPITAL
- Capital takes different forms e.g. money, securities, seedlings and plants.
- It may be in a fixed form, e.g. factory building, machines or raw materials and cash at hand i.e. circulating capital. It should be noted that capital takes time to be accumulated. This is a result of savings.
Savings is the excess of production over consumption. When consumption is postponed, savings are made and the savings are accumulated into capital available for investment.
REASONS FOR SAVINGS
- People save in order to acquire social status, power and affluence.
- People save for future purposes.
- People also save in case of unforeseen circumstances such as loss of job, accident and ill health.
- People save to take care of themselves and other friends or relations.
TYPES OF CAPITAL
- FIXED CAPITAL: Are durable goods such as buildings and machines.
- CIRCULATING CAPITAL: This is the amount of capital needed for the everyday business. The money used for purchase of raw materials and payment of salaries falls in here.
- SOCIAL CAPITAL: These are assets not connected directly with production but are essential for improving the efficiency of labour and the standard of living of the populace. These include the nations stock of school, houses, hospitals, and roads.
is the person who initiates, organizes, co-ordinates and takes the risks involved in a business organization. In-short, he is the manager of a firm or business.
FUNCTIONS OF THE ENTREPRENEUR
- The entrepreneur bears risks alone, although, if the business prospers, he enjoys the benefits.
- He takes decisions on what to produce, how to produce and in what quantity to produce, taken cognizance. Of the available resources at hand and the environment in which he is operating.
- He initiates, organizes and co-ordinates the business in such a way that will profit him.
- As the manager of the business, he pilots the affairs of the organization in every aspect both employment and dismissal of disobedient workers.
- Above all, he is the overseer of the business.