Q:

What are the factors of production?

A:

Quick Answer

Land, labor, capital and entrepreneurship are the factors of production. Factors are goods and services available to individuals and businesses used to produce valuable consumer products.

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What are the factors of production?
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Full Answer

Land is an economic resource that includes farms, trees, fisheries, plants and animals. While some of these resources are renewable, resources in this category are considered fixed or limited.

Labor is the human capital used to transform raw materials into consumer goods. All able-bodied individuals capable of working in a nation are included in human capital. This factor can be improved through education and training, and is flexible, as workers can be moved from one area of an economy to another.

Capital represents not only the monetary resources used to purchase natural resources and human capital, but also major physical assets that individuals and companies use to produce goods and services. These assets can include buildings, factories, equipment and vehicles. Individuals can create or purchase capital production assets.

Entrepreneurship is considered a resource because entrepreneurs create ideas and take on the risks of creating valuable goods or services. Entrepreneurs turn goods in an existing economy into consumer goods that otherwise would have remained in their raw material state. Entrepreneurs perform the managerial function of gathering, allocating and distributing economic resources or consumer products.

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