Factors of Production
Essay by siumui97 • October 30, 2018 • Coursework • 360 Words (2 Pages) • 647 Views
Factors Of Production
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Factors of production are the inputs that used in the process of producing goods and services to fulfill human’s needs. The production of good and services can make an economic profit. The factors are divided into four factors. It consists of labour, land, capital and entrepreneur.
Labour is the importance persons who contribute their energy in the process of producing the good and services. Labour are divided into two types, that are skilled labour and unskilled labour. Skilled labour is the person who work hard with high skill level through the human capital while unskilled labour is the person who work with a limited skill. The reward for the labour is wage. Wage is a payment to the worker who contribute physically and mentally to the process of producing the good and services. It is a largest source of income for labour.
Land is the natural resources of the earth. Land is one of the factor that used to support human’s activity such as produce good and services. For example, entrepreneur need a proper place to carry on their business activity to gain profit. Land also provides raw materials for business to produce good and services. The return of land is rent. Rent is the reward to the owner of the land who willing to lease out their assets.
Capital is the wealth in the form of money or other assets that are used to earn profit or for company’s use. Machines, building and transports are list in the category of capital. This kind of capital are use to produce good and services. The reward to the capital is interest.
Lastly, entrepreneur is the person who combine all the factor of productions to produce good and services. Entrepreneur must creative and innovative to find a new to produce good and services. If the entrepreneur did not make the combination, many of innovations that around us would not exist. Entrepreneur must be a person who brave to take the risks and make any decisions regarding to different situations. The return to the entrepreneur who willing to take the risks is profit.
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