FACTORS OF PRODUCTION for 8C & 8D

Dear 8C & 8D students,
watch the following links.
http://www.youtube.com/watch?v=hG9PQHD5ROA

http://www.youtube.com/watch?NR=1&feature=endscreen&v=Q7KlMb4U0IA


Take a print of the following notes & past it in your note book:

Factors of Production

Anything which contributes to production is called a factor of production.

Land, Labour, capital, and entrepreneurship used by society to produce consumer satisfying goods and services are termed as factors of production, they  are also known as resources or scarce resources.

• Land

            In economics land refers to all kinds of natural resources that are freely found

            in  nature ,which are limited in supply ,which can be controlled by man  and

            used in the production of goods. Reward for land is rent.

• Labour can be defined as any mental or physical effort  (excluding entrepreneurial organization) which contributes to the production of goods and services for which it receives income. Reward for labour is wages / salaries

• Capital refers to that part of wealth which is used along with labour for producing additional wealth .Reward for capital is interest.

• Entrepreneurship is the special sort of human effort that takes on the risk of bringing labour, capital, and land together to produce goods. or services in the expectation of a future reward. That reward is called profit in economics.

Functions of an entrepreneur

¨      Management and control

¨      Risk and uncertainty bearing

¨      Innovation

Factor Income

   Rent

It is the factor payments to the owners of land for using the various resources of land in the production of goods and services

   Wages

A factor payment to the owner of labour for using labour services in the production of goods and services

   Interest

It is the payments for the use of borrowed funds or the price paid for the use of loanable funds’

   Profit

Profit refers to a reward enjoyed by an entrepreneur for his entrepreneurship or for his contribution to the process of production. It is a reward for bearing of risks and uncertainties and introducing innovations