What are Factors of Production?
The Inputs required for Production of Goods and Services are called Factors of Production
Following are Factors of Production
|Factor of Production||Example|
|Labour||Workers who work in Factory are Required for Production|
|Capital||Owners Provide Money to Run businesses called Capital, Bank also gives loan to run businesses|
|Land(Fixed Natural Resources)||Land is a Fixed Natural Resource, Rent of Land used for Factory needs to be Paid|
|Entrepreneurship||Owners who run the business take their Profit Share|
What are Factor Services?
They are the services rendered by factors of production.
|Factors of Production||Factor Services|
|Land||Provision of Natural Resources for running busness|
|Capital||Provision of Money for purchase of different assets|
|Entrepreneurship||Combining land, labour, capital to produce different goods and services|
What are Factor Payments?
The Remuneration Paid to Factors of Production is called Factor Payment.
Wages are Paid to Human Labor (Workers)
Interest is Paid to Owners who Provide Capital
Rent is Paid for Use of Land
Profit Share is paid to Entrepreneurs for running business
Assuming there are only 2 Sectors in Economy: Firm and Household
Which Sector Provides Factor Services to Whom?
Households provide factor services to Firms
Which Sector gives Factor Payments to Whom?
Firms give Factor Payments to Households
What are the four factors of production and what are the remunerations to each of these called?View Answer
The four factors of production are:
1. LAND - It includes the transfer of natural resources like air, water, soil etc.
The remuneration paid for land is called rent.
2. LABOUR - It includes the services of physical labour provided by humans.
The remuneration paid for labour is called wages.
3. CAPITAL - It includes the money provided to make investments such as purchase of assets like machinery, building etc.
The remuneration paid for capital is called interest.
4. ENTRPRENEURSHIP - It includes the services provided by individual who take risk of running the business.
The remuneration paid for entrepreneurship is called share in profit.