![]() ![]() Land and labour are, therefore, primary factors whereas capital and entrepreneur are secondary factors. Land they say is appropriated from gifts of nature by human labour and entrepreneur is only a special variety of labour. Some economists are of the opinion that basically there are only two factors of production-land and labour. Thus, entrepreneur ship is a trait or quality owned by the entrepreneur. He is loosely identified with the owner, speculator, innovator or inventor and organiser of the business. ![]() What and where he will produce and by what method. He decides in what proportion factors should be combined. X who takes the risk of manufacturing television sets will be called an entrepreneur.Īn entrepreneur acts as a boss and decides how the business shall run. He hires the other three factors, brings them together, organises and coordinates them so as to earn maximum profit. (iv) Entrepreneur:Īn entrepreneur is a person who organises the other factors and undertakes the risks and uncertainties involved in the production. Logically and chronologically, capital is derived from land and labour and has therefore, been named as Stored-Up labour. An increase in the capital of an economy means an increase in the productive capacity of the economy. Examples are-machines, tools, buildings, roads, bridges, raw material, trucks, factories, etc. Land, therefore, includes all gifts of nature available to mankind-both on the surface and under the surface, e.g., soil, rivers, waters, forests, mountains, mines, deserts, seas, climate, rains, air, sun, etc. It refers to all natural resources which are free gifts of nature. In this formula, Q is the quantity produced from the inputs L and K. The factors of production are land, labor, capital, and entrepreneurship. Alternatively, production is undertaken with the help of resources which can be categorised into natural resources (land), human resources (labour and entrepreneur) and manufactured resources (capital).Īll factors of production are traditionally classified in the following four groups: The four factors of production are inputs used in various combinations for the production of goods and services to make an economic profit. Primary inputs are also called factor inputs and secondary inputs are known as non-factor inputs. It is primary inputs which are called factors of production. In the above example, soil, tractor, tools and farmer’s services are primary inputs because they render services only whereas seeds, manure, water and insecticides are secondary inputs because they get merged in the commodity for which they are used.
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