4 FACTORS OF PRODUCTION (LAND, LABOUR, CAPITAL AND ENTREPRENEUR) AND CHARACTERISTICS

Factors of production is the general name for the inputs used in the production of goods and services in an attempt to make a profit.

There are four factors of production, namely; land, labour, capital and entrepreneur.

Land

Land, as a factor of production, refers to the physical surface of the earth on which productive activity takes place, as well as the natural resources beneath or on the land

Land serves as the productive base of all economic and productive activity. Mineral resources which serve as a major source of earnings for many countries are deeply rooted in the land.

Characteristics Of Land

1. Land is a gift of nature: Land contains natural resources and other components which are gifts of nature.

Most countries extract mineral resources such as crude oil, bitumen, and diamonds without paying for them.

2. Land is immobile: No one can move land or the resources that are deeply rooted in their land.

Lands are always in the same place, and their location does not vary.

3. Land is heterogeneous: No two lands are the same. Even if two lands have the same size, they will certainly differ in their characteristics.

For example, different lands have different resources. The Fertility and composition of two lands may also vary.

4. Land always appreciates: The value of a building may depreciate but the value of land will generally not depreciate.

In most cases, the value of land purchased today will increase in a few years. This is why it is generally believed that purchasing land is a good investment.

5. Land has many uses: We can make use of land in many ways. Land can be used for cultivation. 

Commercial activity can be carried out on land. Land can also be used to construct residential buildings

6. The reward for land: The reward for land is rent.

Labour

Labour can be defined as all human physical and mental exertion directed to the production of goods and services.

It includes all human efforts in the production of goods and services.

Characteristics of labour

1. Labour is a human factor: Unlike land, Labour is a human factor because it is the sum of all human efforts in the production of goods and services.

Because labour is a human factor, certain things have to be taken into consideration when it comes to labour.

Good working conditions and fair and equitable working conditions are some of the things that we have to be considered when it comes to labour.

2. Labour is perishable: Labor is perishable, which means that it can't be stored.

The labour of an unemployed person, for example, cannot be stored. There is no way for a labourer to store his or her labour.

Any labour not done in a day is lost forever.

3. Labour has a derived demand: Labour is not just demanded for its own sake. Rather, Labour is demanded because of the goods and services that can be obtained through it.

4. Labour is heterogeneous: There is nothing like homogeneity of labour. This is because no people can have the same skill set and qualifications.

Indeed, labour is unique and the quality of labour differs from one person to another.

5. Labour has work limitations: As mentioned earlier, labour is a human factor. This means that labour cannot be used to work for an unlimited amount of time like machines.

To perform at their best, workers need enough rest and leisure time.

6. The reward for labour: The reward of labour is wages, salaries or commission

Capital

Capital includes all physical and man-made resources used in the production of goods and services.

Capital also includes resources that can be used in the production of further wealth.

READ ALSO: MEANING AND SCOPE OF COMMERCE

Characteristics of capital

1. It is a passive factor: Capital is a passive factor in the sense that it doesn't produce anything on its own.

It requires the support of other factors of production like labour and entrepreneur to be functional.

2. Capital is durable: Capital is not perishable like labour. It is long lasting although it depreciates over time.

For example, if the equipment is used over and over again, it will certainly depreciate until it reaches its scrape value.

3. Capital is mobile: Unlike land, capital is mobile as it can be easily moved from one place to another.

Indeed, capital is the most mobile factor of production.

4. Capital is man-made: Unlike land which is a gift of nature, capital is not a gift of nature.

Rather, it is man-made factors of production as it is produced by man.

To illustrate, machinery and equipment are all made by man, and not provided as a gift of nature

5. Capital improves productive capacity: Human productivity can be increased through the use of machinery.

Hence, capital increase adm improves the productive capacity of individuals.

6. Reward of capital: The reward of capital interest.

READ ALSO: ECONOMIC GROWTH –MEANING, ADVANTAGES, DISADVANTAGES AND SOURCES

Entrepreneur

This is the factor of production that coordinates and manages all other factors of production (labour, land and capital).

An entrepreneur can also refer to a person who uses various factors of production such as land in the production of goods and services.

Characteristics of entrepreneur

1. He takes all risks: Production and other economic activity involve some inherent risk.

Any entrepreneur who ventures into business activities will have to assume this risk.

2. Provides other factors of production: Entrepreneurs alone cannot venture into productive activity on their own

He has to provide the land, labour and capital to enhance the production of goods and services.

3. It is a human factor: Like labour, the entrepreneur is also a human factor of production.

As a result, he is driven by profit motives. 

4. He earns profit or loss: The reward of an entrepreneur is profit.

Along with the reward of profit is loss. It is also possible that an entrepreneur suffer loss

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