factors of production_economics_grd 7

Four factors of production

Land, labour, capital and entrepreneur

Land

All gifts of nature used in the production of goods and services that satisfy human wants

Labour

Human effort of all types (physical or mental) done for a reward

Capital

All manmade resources used in the production of goods and services

Entrepreneur

The person who organizes and employs the factors of production and bears the risk in the business

Reward for land

Rent

Reward for labour

Wages or salary

Reward for capital

Interest

Reward for entrepreneur

Profit

Types of labour

Physical, mental, skilled and unskilled

Physical labour

Work done by the physical power of the worker, not much mental ability needed

Mental labour

Work done by the mental power of the worker, physical ability is not much needed

Skilled labour

Work done with education and specialized training

Unskilled labour

Work that does not require a specialized training or education

Types of capital

Fixed capital and working capital

Fixed capital

Long lasting capital that cannot be changed over a short period of time

Working capital

Things that are used up in the process of production

Examples of fixed capital

Machineries, tools, factory building

Examples of working capital

Raw materials, fuel, power