What are the factors of production? Describe the factors of production.

Discuss the relative importance of the factors of production. Answer: Meaning of Production: In the ordinary language, the term
1.

"production" means creation of matter or things (i.e., creation of something out of nothing). But creation of something out of nothing is possible only by God, and not by man. So, in economics, the term 'production' is used in a different sense. It means production of something out of something else. Men can neither create matter nor can destroy it. Production means creation of additional utility. Iron-ores are given by nature. Men cannot create iron. They can only take out iron from ores by different processes. This iron is then given different shapes or forms to make it more serviceable. The production simply means creation of utility. In the words of Frases, "If consuming means extracting utility from, producing means putting utility into." Factors of Production: To produce a particular commodity different factors of production are necessary. Thus, the various elements of production can broadly he divided into main four classes: Land: Land, in Economics, does not include mere soil but whole animate and inanimate nature exclusive of human beings. The location and fertility of the soil, the climatic conditions, rainfalls, air and sunshine, the mineral products like gold, silver, iron-ores, copper, etc., forests, vegetables, fisheries and animal products, the wind and waterall are included in land as a factor of production. Land is a resource or input that is a gift of nature It exists independently of human activities. In economics the payment for land is often called rent.

Labour: Labour is any human effort to produce goods and services. The
payment for labour is usually called wages (payments might be commissions, salary, bonus or whatever). Labour can be physical or mental. A person digging a ditch, managing a firm, or performing accounting functions is providing labour. Labour includes all types of physical and mental works by men for a monetary reward. Human labour is concerned with production, consumption, exchange, distribution of wealth and all other activities connected with money. Capital: Men have always used some machines and tools for production. In the modern process of production very complicated machineries are used. Capital is a means of production that is made by human labour and used for the further production of goods and services. Drill presses, dams, roads, irrigation canals and buildings are examples of things that may be considered as capital if they are used to produce other goods. The payment for capital is usually measured as interest. Capital includes the whole of the stock of wealth consisting of machines, tools, implements, factories and buildings, raw materials, consumers' goods which are used for production of further wealth. Organisation: There must also be some people to direct, and to organize the course of production. Organisation refers to that agent of production which undertakes the task of organising an enterprise and bears the risk. Its task is to design and initiate any production to bear the risk. Conclusion: Finally, we can conclude that, Land, the free gifts of nature, is the first requisite for production. There must be someone to produce something on that land who is called labour. To do everything in a systematic way there must be the presence of capital. The last agent directing the course of productive activities is called the organization.

The relative importance of the factors of production:

Relative Importance of Factors of Production:

The relative importance of the factors of production varied from time to time. In the early stages of human civilisation, land was considered the most important factor of production. After sometime, when man began to exploit natural resources, labour was considered more important than land. Today; capital and' organisation are considered-very important. However, one'can say that in industries or activities where more materials are required, land (i.e., resources of nature) can beconsidered more important. In small labour-intensive industries or activities, labour can be regarded as more important, in heavy and large industries, capital and organisation can be considered more important. Importance of Land: Land is of fundamental importance in the production of wealth. The economic prosperity of any country depends on the abundance of its land (i.e., natural resources). It is often remarked that a country is what Nature (i.e., land) has made it. The importance of land is clear from the following facts: 1. The production of agricultural crops in a country depends upon the natural resources, such as soil, rainfall, heat, etc. 2. The production of industrial goods also is influenced by land. Land influences industrial production directly as well as indirectly. For instance, mineral resources which are one of the natural resources, influence industrial production directly by providing the raw materials and fuels required by the manufacturing industries. 3. Natural resources like soil, rainfall, heat, etc. influence industrial production indirectly, in the sense that they influence the growth of agricultural crops, which in turn, serve as the raw materials for manufacturing industries. 4. Localisation of industry also depends upon land, i.e., on the availability of natural resources, such as raw materials, power, water, etc. The development of means of transport and communication is largely determined by the topography of land and other natural factors 5. By influencing the agricultural and industrial production and the development of transport and communication, land moulds (i.e., influences) the occupations, life and the standard of living of the people of a country, Importance of Labour: Labour is an important factor of production. Without labour, production is unthinkable. Further, the need for labour arises in allproductive activities. Again, labour not only produces wealth, but also consumes wealth. Importance of Capital: Capital had existed and played an important role in production in every stage of human civilisation. Even in the hunting stage of human civilisation, capital existed in the form of bows and arrows. However, in modern days, capital piays a very important rote in production Capital is the life-blood of modern industry, the breath of industry or the oil which lubricates the wheels of industry. Modern production is dominated and controlled by capital. That is why. modern production is known as capitalistic production The role of capital in production is as follows: 1. Capital has contributed to modern large-scale production. Without capital, the modern large-scale production would not have been possible. 2.Capital increases the productivity of labour. The productivity of labour increases with the use of capital For instance, a farmer with ploughs and cattle can definitely produce more than a farmer without them. Similarly, a fisherman with fishing boats and nets can definitely have more catch than one without them. 3 Capital contributes to economic development. The economic development or prosperity of a country is very much dependent on the amount of capital available in the country. Higher the capital (ormation, the greater will be the investment, employment, propduction, national and per capita income and standard of living. The economic prosperity of the U.S.A., Great Britain, West Germany, etc is due to the availability of more capital. Importance of Organisation: Organisation has become an important factor of production. Unless land, labour and capital are organised (i.e., brought together and put to effective use), there cannot be any production. So, successful production and the success of business depends upon efficient organisation. Further, organisation determines the volume of production. It is the efficient organisation that is responsible for modern large-scale production in advanced countries like the U.S.A., Canada, Great Britain, West Germany, the Russia, Japan, etc. Again, organisation determines even-the pattern of production in a country.