Production And Factors Of Production

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CONTENTS

1) What is Production.2) What are Factors of

Production.• Land and its Features.• Labour and its Features.• Capital and its Features.• Entrepreneur and its

Features.

Production is defined as the process of converting the input (raw material) into output. Production may be an activity that

generate income.

CONCEPT OF PRODUCTION

What is Production Production is an outcome of an

economic activity.

Production is further defined as: “Any activity directed towards the satisfaction of other peoples wants through the exchange."

Or Production means, a process by which resources (men ,material, time etc.) are

transformed into a more useful commodity or services.

In general, Production means transforming inputs ( Labour, machines, raw materials, etc.)

into an useful & desired output. For e.g.

Steel from iron ore,

What is Factors of Production

-> Anything that assist production is termed as

factor of production.

-> It become a factor of Production

only when it actually assist or contributes to production.

Factors of Production Factors of Production are parameters

which affects output of any production. In order to produce goods and services

to satisfy the needs and wants of consumers it needs four basic things which are called factors of production.

Input decides the quantity of output i.e. output depends upon input.

Input is the starting point and output is the end point of production process.

Basic Factors of Production

1) LAND 2) Labour

3) CAPITAL 4)ENTREPRENUER

Land1) Land is the original and primary

factor of production.

2) Without land the production process cannot exceed further.

3) In Economics all the natural resources that are available –

a) on the surface of the earth b) below the surface of the earth c) above the surface of the earth and which are used in the

production process is called LAND.

1) Land is a free gift of nature.

2) Land has no cost of production.

3) The supply of land perfectly inelastic.

4) Land is subject to Law of Diminishing Return.

5) Land is immobile.

Features of Land

LABOUR

Labour is the human factor of production and include all the physical and mental activities

which are required in the process of factor of production.

-> In economics Labour is defined as- “Economic activity of man with HEAD and HAND.”

->Labour is a resource which is used involved in every stage of production, either it is manufacturing or assembling, it affects production directly on indirectly.

Labourer can be classified as -: 1. Mental Labourer 2. Physical Labourer.

Labour

Features of Labour

1) Labour is a human factor.

2) Active factor.

3) Labour cannot be stored.

4) No two Labours are identical.

1) Capital is a man-made resource of production used to produce further wealth.

2) It refers to the stock of capital assets such as factories, machines, tools & equipments, raw material, transport vehicles etc…

3) In Economics, Capital is that part of wealth which is used for production.

Capital

Capital as part of WealthAny Commodity own by any person is his wealth. But when wealth is used in production process, it is called CAPITAL. For e.g.

A motor cab own by any person is his wealth. But when this Car is used in Taxi Services, then it is called CAPITAL.

TWO ASPECTS OF CAPITAL

HUMAN CAPITAL

PHYSICAL CAPITAL

HUMAN CAPITAL

Knowledge

Life experience

Skills and ability

Creativity

Physical capital

1) Capital is man-made factor of production.

2) Supply of capital is elastic.

3) Capital has mobility. 4) All capital is wealth but

all wealth is not capital.

Features of Capital

Brings all the factors of production together in a profitable way

Characteristics of an entrepreneur Trustworthy Enthusiastic Risk taker Professional Honest Hard working Energetic Passionate

Entrepreneurship

1) Entrepreneur is a person who brings in land, Labour & capital in one place & uses it for the production process.

2) He is the person who decides- a) What to produce? b) How to produce? c) Where to produce? 3) The person who takes these decisions along

with the risk associated with them is known as ‘Entrepreneur’.

Entrepreneur

1) He must be a good Administrator.

2) Risk Bearer and Decision Maker.

3) He must be a Person of Imagination.

4) He must have good Negotiation Skill

Features of Entrepreneur

Presented by:- Rahat Inayat Ali 14 CH 23

Special Thanks to:- Ma’am Aisha Kouser

Q/A Section Begins ……