INTRODUCTION TO FACTORS OF PRODUCTION
Those economic resources which are used in further production of wealth are known as factors of production.Land,Labour,Capital and Organization are basic factors of production.
LAND
Simply ,land refers to the surface on the earth .But in economic sense ,land means all the free gifts of the nature.Forest ,Himalaya,Water resource ,Air etc come under land.
FEATURES OF LAND
1. FREE GIFT OF NATURE:Land is free gift of nature.It has been given to us free of cost by the nature .so,it doesnt hold any cost of production,rather it has its market value which depends on the productiivity ,fertility of land.
2. FIXED IN SUPPLY:Land is fixed in supply.Efforts of human being cannot change the quantity or size of land.Land cannot be extended or contracted by human will.
3. INDESTRUCTIBLE:Land is not destroyable.Human beings can destroy the quality of land but not the quantity of it .The quantity of land remains same permanently.
4. PASSIVE FACTOR :Land is a passive factor of production.It requires human effort to activate land to make it a produuctive factor.Land can produce no goods and services unless and until human effort is made..
5. IMMOBILE FACTOR:Land is fixed.It remains where it is.Land is lumpy and indivisible in some cases.since ,land is lumpy and indivisible it cannot be transferred from one place to another.
6. DIFFERS IN PRODUCTIVITY :Land differs in its quality .The same quantity of land with same other factors can produce different quantity and quality of goods in different places.For example.the land of kathmandu valley is more valuable than the land of jumla.
LABOR
1. ACTIVE FACTOR :Labour is the most active and indespensible factor of production.Generally other factors of production like capital and land are fruitless without the use of labor.It brings other factor of production in production process together.
2. PERISHABLE: Labor cannot be stored as other factors of production like capital and raw materials.A day without labor means a days work gone forever.Thus labor cannot be stored for future work.
3. MOBILE FACTOR:Since labor can be transferred from one place to another ,it is considered as mobile factor of production.However ,it is less mobile than other factors like capital because labourers have the feeling of love and affection with their family and the place where the labourers work.
4. INSEPARABLE:No one can separate his/her labor from them and send it to different workplace rather it remains with the labourer.For example,a teacher cannot perform his teaching activities by sending his knowledge ,parts of body and other teaching materials to the colleges/schools.
5. DIFFERS IN EFFICIENCY:Different labourer have different degrees of working efficiency due to their varying working experiences,training,environment etc.Due to their varying working efficiency ,there is difference in the wages and salaries and other fringe benefits that the labourer gets.For example,one labourer can produce more goods and services than others at the same time.
CAPITAL
The man made factor of production which are used in further production of wealth is known as capital.
FEATURES OF CAPITAL
1. MANMADE FACTOR:Capital is not itself created .It is created by the effort of human beings and other factors of production.For example,land is not man made but vehicles ,machinery,buildings etc are man made .so, generally all capitals are man made.
2. PASSIVE FACTOR:Since capital is created by man ,it is a passive factor of production.Machines do not give production without the use of labor.For example ,a computer does not run without an operator,the machine of nebico biscuit doesnot give production without the use of labor.
3. MOBILE FACTOR:Since capital can be transferred from one place to another and from one use to another,it is considered as mobile factor ofproduction.Forexample,machinery,vehicles,technology etc can be transferred from one place to another.
4. DEPRECIABLE:When we use machinery items in production for a long time then it wears and tears.As a result its intrinsic value decreases and it becomes useless even after some reparing.The values of machinery items decreases every year.since, capital is depriciable.
5. SUPPLY IS ELASTIC:The supply of capital can be increases or decreased according to the need of the economy.The supply of machinery ,technology and other raw materials can be made as per the societys requirements.
6. DEPENDS UPON TECHNOLOGY:The amount of capital depends on the level of technology employed by the nation.The more progress in the country's technology the more capital is produced in that nation.
ORGANIZATION or ENTREPRENUERSHIP
An organization is an association of people gathered together with some objectives.The act of bringing various resources together,coordinating them and taking risk to get return is known as entreprenuership and the risk bearers or organizers are known as entreprenuers.
FEATURES OF ORGANIZATION
1. COLLECTION OF PEOPLE:An organization is not run just by the effort or involvement of single individual.It run by the union of the efforts of multiple number of individual.
2. STRUCTURE:An organization has a separate structure for division of its work among the workers to accomplish the tasks.Individuals are assigned their task according to their capability and responsibility.
3. TECHNOLOGY:Technology refers to the techniques used for the transformation of inputs into desirable outputs.The technology may be labor intensive or capital intesive depending upon the financial strength of the organization.
4. ENVIRONMENT:Generally an organization is opened in open environment .It is affected by external factors like socio-cultural and economic factors.
RISK AND RETURN:Every organization is established to earn profit i.e, return by bearing various degrees of risk
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