In economics, factors of production are the inputs to the production process. Finished goods are the output . Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function. There are three basic (AKA classical) factors of production: land, labor, capital . All three of these are required in combination at a time to produce a commodity. In economics, production means creation or an addition of utility. Factors of production (or productive inputs or resources) are any commodities or services used to produce goods or services. Factors of production may also refer specifically to the primary factors, which are stocks including land , labor (the ability to work), and capital goods applied to production. Materials and energy are considered secondary factors in classical economics because they are obtained from land, labor and capital. The primary factors facilitate production but neither become part of the product (as with raw materials ) nor become significantly transformed by the production process (as with fuel used to power machinery). Land includes not only the site of production but natural resources above or below the soil. The factor land may, however, for simplification purposes be merged with capital in some cases (due to land being of little importance in the service sector and manufacturing). Recent usage has distinguished human capital (the stock of knowledge in the labor force) from labor. [1] Entrepreneurship is also sometimes considered a factor of production. [2] Sometimes the overall state of technology is described as a factor of production. [3] The number and definition of factors varies, depending on theoretical purpose, empirical emphasis, or school of economics.
Posted on: Fri, 29 Nov 2013 15:52:31 +0000
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