The term 'factors of productions' is defined as the limited resources used in the production of goods and services. There are four factors of production. They are land, labour, capital and entrepreneur.
Land
- Land is defined as the natural resources used in the production of goods and services.
- Land is a free gift of nature.
- Land is occupationally mobile and geographically immobile.
- Some natural resources are renewable whilst others are non-renewable
- The reward for land is rent.
Labour
- In economics, labour is defined as any human effort, physical or mental, skilled or unskilled done for a reward and not for the pleasure derived from it.
- Labour is a human resource.
- Labour is both geographically and occupationally
mobile.
- The reward for labour is salary or wage.
Capital
- In economics, capital is defined as the man - made goods used in the production of goods and services. Examples include, factory building, factory machines …etc used in the production.
- Capital is divided into working capital and fixed
capital.
- The reward for capital is interest.
Entrepreneur
- Entrepreneur is the person who organizes land, labour and capital for production to achieve profit.
- Enterprise is the entrepreneur’s willingness and ability to bear uncertain risks and to make decisions in a business.
- Enterprise is the most mobile factor occupationally and geographically.
- The reward for entrepreneur is profit.
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