FACTORS OF PRODUCTION

 Factors of production:

 ➡ By Raffi Manzoor

Production involves the creation of products and services by using scarce resources. Producers must exchange the income they earn for the scarce resources they have to enable them to supply . Therefore, both parties, producers and consumers, must exchange something they need for something others want.

There are four types of scarce resource used in the process of production.

Land and natural resources

This includes the land on which production is located as well as the resources contained within the land, such as metals, minerals, and oil. The environment - the air, sea, rivers, and forests – is also a scarce resource.

Human capital

This includes the worth of human skill and physical effort that's available to an economy, and is more commonly mentioned as labour.

Real capital

This includes all man-made assets which are created to assist produce goods and services, like machinery and equipment. It also includes stocks of raw materials waiting to be used before they become goods and serves. The creation of capital is calledinvestment.

Enterprise

Enterprise is supplied by the entrepreneur who has two crucial roles:

➡▶1. Combining the other factors in such a way that goods and services can be produced in the most efficient way.

➡▶2. Taking risks related to the potential loss of assets or with making commercial losses.

Scarce resources are also called factors of production. All production requires the input of scarce resources.