![]() A building in the city could be used as office space, student residential accommodation, expensive and exclusive apartments, or converted to a casino, a library, restaurants or an amusement arcade. ![]() ![]() A choice among the alternatives becomes necessary. Any factor of production can be used to satisfy needs and wants, but not at the same time. At any point of time, there is a fixed, finite amount of the resource which is insufficient to satisfy the demands for it. These four factors of production land, labor, capital and enterprise have some essential features or characteristics, given below: Features or Characteristics of Factors of Production: Profit is the residual return to the entrepreneur after total costs have been deducted from revenue. An entrepreneur, a chief executive officer of a corporation and a business manager all have special skills that are used to produce goods and services for a profit. (4) Enterprise:Įnterprise is the ability to combine the three other factors of production to produce goods and services to satisfy consumption demands. Capital is produced by combining land and labor. It includes commercial buildings like supermarkets, the car and mobile phone used by a sales representatives, overhead projectors, classroom furniture, and libraries used by teachers, computers used by engineers, and scalpels and operating theatres used by surgeons. (3) Capital:Ĭapital is any good used in the production process to produce other goods. Shop assistants, fast food workers, sales representatives, teachers, engineers and surgeons are all examples of the labor factor of production. Labor is considered to be nay productive physical and mental activity. This includes for example, soils, crops, mineral deposits, forests, ocean harvests, flora and fauna. Land is defined as any naturally occurring endowment that an economy has its disposal. Sometimes, the enterprise is included as the fourth factor of production. These resources, or factors of production as they are often called in economic texts, are land, labor and capital. Four Factors of Production with Examples: We inevitably have to make choices in the way we use our resources. Our needs and wants are unlimited and we will never be able to completely and wholly satisfy them, but in any economy the level of resources and the ability to produce goods and services for consumption are limited. The issue of scarcity (shortage – lack – insufficiency) is crucial in understanding economics. ![]() Every economy is endowed with what we call resources, which are inputs used in the production of goods and services for consumption to satisfy our needs and wants. ![]()
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