Factors of Production In Economics is being discussed in this article.The theory of production factors in economics is important in microeconomics.It considers the factors of production in the production process.Production activities certainly require elements that can be used in a production process. production process consists of natural resources, manpower, capital and entrepreneurship.Thousands upon thousands of different types of resources, or factors of production, are used to produce goods and services.
Thus, when producing clothes, it is necessary to have raw materials, such as cotton obtained from agriculture, and workers who operate the machines, which are necessary for the transformation of cotton into clothing. There is also a need for fuel, electricity, drinking water, fabric pigments, means of transportation, among other elements are required for to manufacture the clothes.
To bring order and manageability to any discussion about these resources, economists have, found it helpful to classify them into four groups: labor, capital, and land.
Factors of Production In Economics
Capital includes warehouses, machinery and equipment, computer,paper clips, and ail other goods that are used in the production of other goods and services and that are not used for final consumption.Capital in the economic sense is the goods or products used to produce the product further. Suppose one makes a net for fish. In this case the net is a capital goods, because the net is the product used to produce other products (fish). In the production process, capital can be in the form of equipment and materials.
Any resource could be classified into one of these three groups. To say that something is direct human effort, is man-made, or originates in nature covers all possibilities. Yet economists speak of the four, not three, factors of production. The final factor of production, entrepreneurship, is the performance of a number of critical tasks that must be carried out in all productive processes. Without the performance of these tasks, no economic activity would occur. First, entrepreneurship involves the organization, or the bringing together, of labor, land, and capital to produce a good or service.