INTRODUCTION OF PRODUCTION
In general,
Production refers to the manufacturing of goods and services. In economics,
production refers to creation of utilities in economics goods to satisfy human
wants. Production is a process, which is undertaken to satisfy human wants.
Meaning of Factors of Production
The resources
which contribute to the production of a commodity are called factors of
production or agents of production. Factors of production (means of Production)
are those resources which are put together to produce goods and services.
Factors of Production are:
1. Land:
land refers to all the natural resources found on, above and under the surface
of the earth and which free gifts of nature are and which help in producing
goods or services.
Natural
resources includes the soil, mountains, forests and water resources like
rivers, rain –fall, wind, sunshine, climatic condition, minerals, ores, oils
etc
Land
is natural factor of production and primary factor of production because
production is not possible without land.
2. Labour: it refers to human efforts mental or
physical, which contributes to the production of goods and services. Labour is
human factor of Production.
3. Capital: it refers to that part of wealth which is
created by man for further production of goods & services. Capital is
man-made factor of production.
Capital
includes raw materials, machinery, factory building, cash, and multipurpose
projects like roads, canal etc which are used for producing other goods &
services.
4. Organisation
or entrepreneur: Organisation or entrepreneur refers to that factor of
production which co-ordinates various other factors (Land, Labour &
Capital) in such a way, so as to produce maximum output goods & services at
minimum cost.
The
person who runs the organisation is called entrepreneur.
Factors of Production and its rewards
For
participating in the process of production each factor gets its reward.
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Factors of production
|
Rewards
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Land
|
Rent
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Labour
|
Wages or salary
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Capital
|
Interest
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Organisation/entrepreneur
|
Profits
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A.
Features
or characteristics of Land
1. Free
gift of nature
Land refers all natural resources
found on, above & under the surface of the earth such as the soil,
mountains, forests and water resources like rivers, rain –fall, wind, sunshine,
climatic condition, minerals, ores, oils etc. these resources are free gift of
nature.
2. Natural
or Primary factor of production
Land is original, natural or
primary factor of production, endowed (created) by nature. Nothing can be
produced without land or natural resources.
3. Land
is inelastic in supply
The total area of land available to
the society as whole is fixed. Man cannot increase the supply of land.
The utility of land can be improved
by modern techniques but the supply of land is perfectly inelastic.
4. Land
is geographically immobile factor of Production
Land is geographically immobile
because land of one region cannot be shifted to another region. Due to this
reason the price of land rises in towns & cities.
5. Land
is occupationally mobile.
Land can be used to produce various
crops or it can be used for various purposes.
For e.g. Firm established its
factory in mumbai producing plastic products. It can change its production if
need arise. This called occupationally mobile.
6. Land is permanent
Land is not destructible. The
fertility of land may be destroyed by atomic energy but land remains land.
7. Land
is Passive factor of Production.
Land is passive factor of
production. Land by itself does not produce goods. Land becomes productive only
when labour and capital work upon it.
8. Reward
Land gets ‘Rent’ as it rewards for
participating in the process of production.
B.
Features
or characteristic of Labour
1. Labour
is a human factor
Labour is a living factor which has
likes, dislikes, feelings etc. Labour is both producer as well as consumer. It
is not only means of production but also an end of production.
2. Labour
is an active factor of production
Labour has to work on land and
capital to make them productive. Hence land and capital is passive factors of
production, labour is an active factor.
3. Labour
is inseparable from labourer
Labour cannot be separated from the
labour as he has to be physically present at the place of work. In case of land
and capital, the factors can be separated from its owner. Labour sells his
services and not himself to the employer.
4. Labour
is a heterogeneous factor of production
Skills and efficiency differ from
person to person. Hence wages also differ. The productive efficiency of labour
depends on number of factors like physique, education, intelligence, working
conditions, wage rate etc.
5. Labour
is least mobile factor of production
Labour can mobile from one place to
another place or from one occupation to another. But Labour does not move with
ease due to several factors like social environment, age-bar, housing and
transport problems, religion and language problems etc.
6. Labour
is perishable factor of production
Labour cannot be store for future
use like land labour or capital. Unemployment is waste of man power. If a day’s
of labour lost, it cannot be recovered. Since labour is not storable, an
individual worker has weak bargaining power.
7. Rewards
Labour gets ‘wages’ as it rewards
for participating in the process of production.
C.
Features
or characteristic of Labour
1. Capital
is man-made factor of production.
It is a man-made factor of
production. It is produced by man in order to produce other goods and services.
It is produced means of production. Capital is an artificial resource as it is
produced by man. The creation of capital requires human effort.
2. Capital
is productive.
Capital increases overall
productivity. Capital increases productive efficiency and enables large scale
production.
3. Capital
is elastic in supply.
Since capital is man-made factor of
production, its supply can be increased as and when demand for it arises. The
supply of capital can be increased by increasing the rate of savings and
capital formation.
4. Capital
is durable.
Physical capital goods like
machines, tools, building etc. are durable. They contribute to production for a
long time although they depreciate overtime.
5. Capital
is mobile.
Since capital is a non human factor
it is more mobile than land and labour. Money capital is highly mobile,
geographically and occupationally. Fixed capital is mobile only if there is any
other alternative use.
6. All
capital is wealth.
Since capital has all the
characteristics of wealth i.e. utility, scarcity, transferability &
externally it is regarded as wealth.
Capital is that part of wealth which is
used for further production. Wealth is wider than capital.
