Factors of Production in Economics
FACTORS OF PRODUCTION
Factors of production are inputs into the production process. They are the resources needed to produce goods and services. The factors of production are:
Land includes the land used for agriculture or industrial purposes as well as natural resources taken from above or below the soil.
Capital consists of durable producer goods (machines, plants etc.) that are in turn used for production of other goods.
Labor consists of the manpower used in the process of production.
Entrepreneurship includes the managerial abilities that a person brings to the organization. Entrepreneurs can be owners or managers of firms.
Scarcity does not mean that a good is rare; scarcity exists because economic resources are unable to supply all the goods demanded. It is a pervasive condition of human existence that exists because society has unlimited wants and needs, but limited resources used for their satisfaction. In other words, while we all want a bunch of stuff, we can’t have everything that we want.
Rationing is a process by which we limit the supply or amount of some economic factor which is scarcely available. It is the distribution or allocation of a limited commodity, usually accomplished based on a standard or criterion. The two primary methods of rationing are markets and governments. Rationing is needed due to the scarcity problem. Because wants and needs are unlimited, but resources are limited, available commodities must be rationed out to competing uses. Virtual University