It should be noted that labour is distinct in that it is the services of labour that are bought and sold and not the labour itself. It refers to human efforts both mental and physical directed towards the production of goods and services. 2) LabourĪmong the four factors of production, labour is another one that possesses greater significance in an economy. This way, they can improve production processes for turning natural resources into consumer goods. This means that economies must carefully use the land resource by creating a mix of natural and industrial uses. This is because governmental regulations prevent people from claiming anything for themselves because if this were to happen, then there wouldn’t be enough resources for everyone.

It is however limited as previously mentioned, together with the resources on it. Land, therefore, is an essential part of the production. As an input of production, the reward of land is rent. Alternatively, more land can be allocated to buildings at the expense of farming land.ĭrainage, irrigation, and fertilizers can increase the area of cultivated land. Thus, for example, more maize can be planted at the expense of wheat. The total supply of land in the world is limited although the supply of land for more particular use is not fixed. There are four factors of production: land, labour, capital and entrepreneurship and understanding these factors, as well as the role they play in the economy, is of great importance.īelow is a more detailed discussion to help you understand these factors and their role in the economy. These inputs are the resources that businesses in a country use to create income and wealth. Thus, every act that increases the ability of the good to satisfy human wants is a part of the production.Įconomic systems rely on certain inputs known as factors of production to operate efficiently. In the case of wheat, it will involve tilling the land, plant the wheat, harvest the after yield, transport the wheat to production areas, grind it, bake bread and there after availing it the market for the general population (consumer) to buy and consume. This, therefore, means that production starts right from the ground. It, however, is not only limited to creating things, but it also involves doing everything possible to ensure that the goods produced can satisfy human wants. Production by definition is the utilization of available economic resources to create things that satisfy human wants e.g.

Factors of production examples