Factors of Production

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Production is the process of creating utility or value in goods and services to satisfy human wants. Adam Smith defined production as creation of material goods only, while modern economists include t…

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A factor of production is anything that helps in the process of production. The main factors of production are land, labour, capital and enterprise.

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The demand for factors of production is called derived demand because these factors are demanded only when goods and services are demanded. For example, labour is needed to produce soap only when soap…

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The four factors of production are land, labour, capital and entrepreneur. Rent is paid to land, wages to labour, interest on capital and profit to entrepreneur.

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Land is a stock of free gifts of nature. It includes the soil surface and all natural resources useful in production. Its reward is rent.

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Land is called a passive factor because it cannot produce anything by itself. It needs labour and capital. It is called a primary factor because no production is possible without it.

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Land is a free gift of nature, fixed in supply, permanent, immobile, passive, and varied in fertility and location. It also has many uses such as farming, building, transport and industry.

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Land is the only factor of production with a perfectly inelastic supply curve because its total supply cannot be increased or decreased by human effort.