There are four factors of production namely:
Table of Contents
- Land: rent
- Labour: wages or salary
- Capital: Interest
- Entrepreneur: Profit
The land is a gift of nature. It is the oldest factor of production. It involves water, forest, wind resources, etc. Its reward is rent.
Features of land
- Land is a gift of nature
- Land is immobile
- Land is subject to diminishing returns
- Its supply is fixed by nature.
Importance of land
- Land is used for cultivation i.e. farming
- It is used for livestock production, rearing of animals such as goats, sheep, cattle and poultry, etc.
- Land is used for wildlife conservation
- It is used for residential purposes e.g. building houses, shops, etc.
- Land is the source of minerals like gold, kerosene, petroleum, etc.
- It can be used as collateral security to obtain a loan in the bank.
Labour means human efforts(both physical and mental efforts) put into production. Labour could be skilled, semi-skilled, or unskilled. The reward for labour is wages or salary.
Features of labour
- Labour is a mobile factor. It can be moved from one place to another.
- It is a human factor
- It has feeling
- Labour cannot be predicted.
Importance of labour
- Labour is needed to operate machines.
- It influences other factors of production
- It helps in the production of goods and services.
- It provides the required skill needed in production.
Capital is man-made wealth used in production. The reward is interest.
Features of Capital
- Capital is man-made wealth.
- It is subjected to depreciation
- It can change its form
- Capital is highly durable.
Importance of capital
- Capital facilitates the production
- It increases the standard of living
- It attracts investors to the business
- It can help in the production of quality goods.
This coordinates and organizes all other factors of production for more productive purposes. He is the risk bearer manager and his reward is profit.
Features of Entrepreneur
- He is the risk bearer.
- He provides the capital for business
- He is a decision maker
- He employs labour
- He controls other factors.
Importance of Entrepreneur
- Entrepreneur provides the capital needed for production
- He bears the risk of the business
- He manages and controls the business
- He is the decision maker
Relationship between producer and the consumers
- Producer is someone/individual that manufactures the products or goods needed by the consumers.
- Consumers are those that make use of the goods.
Production starts with the producer and ends with the consumers. Production is not complete until the goods produced reach the final consumers.
- Give the factors of production and their rewards.
- Explain land and its features
- State four importance of land