What are factors of production?

Factors of production are the economic resources that are used to produce goods and services.

There are four factors of production,which are:

• land
• labour
• capital
• entrepreneurship

Factors and their Rewards

What is land?

Land is defined as a range of natural resources .It is made up of all the free gifts of nature .land includes all the factor services available naturally, either above or beneath the earth's surface.

What is labour?

Labour is the human energy an mental skills used to produce economic goods.

Some jobs involve more physical labour ,eg. construction workers, sugarcane cutters, while others focus on mental skills,eg. a business manager making business plans. 

What is Capital?

Capital refers to goods used to produce more goods and services . these goods are not wanted for their own sake but,to help in the production of other goods and services. the purchase of capital goods is investment , such as the the purchase is not part of the current consumption. therefore capital is any man made goods used in production, to generate earnings over a period of time ,eg. factory building machinery and equipment . Capital tend to be durable.

What is entrepreneurship?

• The entrepreneur performs 2 functions:
• He combines the other 3 factors of production in a profitable manner.
• the entrepreneur is the factor that  bears the risk of production. this risk involves paying for the other factor inputs required to produce goods and services before any revenue is received from selling the goods produced entrepreneurs are prepared to take risks to achieve rewards mainly in the form of profit.

Important Terms Used Throughout Economics.

What is: 

• A Good?

- A good is any tangeable item. It is broken down into two types, which are:

1. Free Goods -these are readily available so that consumers don't have to make a sacrifice in order to use it. For example, sunlight or oxygen.

                                                     

      2. Economic Goods- this is one in which a sacrifice has to be made for it to be consumed. This is so because if we desire more of this good, we would have to pay the price it carries. For example, cell phones, cars, etc.
                                              

• A Service?

- A service any work or favour carried out for someone in exchange for money. It is consumed to satisfy human needs and wants. It is intangable. Examples are; transportation, insurance, health care, etc.
  
                                  

•   Opportunity Cost? 

- Opportunity Cost is the next best alternative ,sacrificed from among other competing options.for example, if you are on a diet and have to choose between an apple and a hamburger,you would choose the item that will be more beneficial to your situation.Therefore you will choose the apple and because the hamburger was forgone, it would be named as the 'Opportunity Cost'.

                                                             

• A Want?

- A want is any good or service that is desired to improve the quality of life but is not necessary for life.  example; a designer jeans versus simple clothing.

• A Need?

- A Need is any good or service that is essential for life.They are indeed required to lead a basic life. For example; food, clothing, shelter.

• Scarcity? 

- Scarcity is the economic condition where resources are insufficient to satisfy all of man's needs and wants. We, as humans, have unlimited needs and wants while there is limited resources available. This means that resources are scarce.

• Choice? 

- Choice is a decision that has to be made from a range of options.This is what leads to opportunity cost. Man cannot acquire all that he needs or wants, so making a choice is manditory in our daily lives.

WHAT IS ECONOMICS?

- Economics is a social science which studies how people create wealth from the allocation of scarce resources.

Here are some key terms you will meet while we begin this study of economics:

1. good
2. service                                            
3. opportunity cost
4. wants
5. needs
6. scarcity
7. choice