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Nov 28

But those who have such qualities are able to operate effectively and efficiently in almost any industry. In the business world, however, capital is always expressed in terms of money. 6. total output/ member of employees. These inputs are called factors of production named as land, labor, capital and organization. Economists use the term capital to mean goods used for further production. This includes production in manufacturing industry, viz., turning out semi-finished and finished goods from raw materials and intermediate goods— conversion of flour into bread or iron ore into finished steel. productivity definition. Factors of production – definition Factors of production are the resource inputs needed by producers in order to create an output of goods and services. Production function, in economics, equation that expresses the relationship between the quantities of productive factors (such as labour and capital) used and the amount of product obtained. The entrepreneur under­takes both these risks in production. The income received by the owner of land is known as rent. Similarly, when coal is used in a factory, it is capital, but when coal is used as domestic fuel, it is a consumption good. This is due to the fact that risk is borne by the share­holders and the day-by-day control of the business is generally in the hands of salaried managers or managing directors. (b) The occupational mobility of labour which relates to the extent to which workers change occupations or skills in response to differences in wages or job availability (e.g., a jute mill worker joining a tea garden). The essential characteristics of the business firm is that it purchases factors of production such as land, labour, capital, intermediate goods, and raw material from households and other business firms and transforms those resources into different goods or services which it sells to its customers, other business firms and various units of the government as also to foreign countries. It might be used for farmland, roads, rail­ways, airlines, public parks, playgrounds, resi­dential housing, office buildings, shopping complex, and so on. For general purposes, it is necessary to classify production into three main groups: Primary production is carried out by ‘extractive’ industries like agriculture, forestry, fishing, mining and oil extraction. Like land, labour is also a primary factor of production. Productivity and value of land can be increased if it is improved with fertilisers, irrigation and the erection of fences and buildings. Theory of production, in economics, an effort to explain the principles by which a business firm decides how much of each commodity that it sells (its “outputs” or “products”) it will produce, and how much of each kind of labour, raw material, fixed capital good, etc., that it employs (its “inputs” or “factors of production”) it will use. First, labour market transactions are particularly significant for: First, labour market transactions are particularly significant for the individual worker. A rational producer is always interested that he should get the maximum output from the set of resources or inputs available to him. TOS4. Accessed April 9, 2020. An entrepreneur is to determine what to produce, how to produce, where to produce, how much to produce, how to sell and so forth. Therefore, the supply of lands is strictly limited. In fact, production can never take place without some risk being involved; the decision to produce something has to be taken in anticipation of demand and there must be some element of uncertainty about that demand materialising. Very few people have these rare qualities. The end result is that changes in the total area are really insignificant. It is physically possible to dismantle them and move them to different sites or locations, but the cost of doing so will be so great that it will not be economically feasible to do so. This is a signal that the quantity of labor deployed in production at this firm is already optimal. For example, if we were measuring total product as divided by labor, we would be measuring the Average Product of Labor. Even if income is high savings will be low in the absence of the above-mentioned savings institutions. The next major function of the entrepreneur is to make necessary arrangement for the division of total income among the different factors of production employed by him. Government services, such as law, administration, education, health and defence, are also included. Many buildings however, can be put to better uses. These factors require more time to manipulate than variable manufacturing inputs and, thus, are considered to be “fixed” in the short run. Profit is the reward for successful conduct of business. So labour is perishable. We may now study the nature and characteristics of four factors against this backdrop. Examples cover distributive traders, banking, insurance, transport and communications. Many of the old buildings used as cinema house or god-owns in northern area of Calcutta have been dismantled and converted into multi-storeyed buildings. (1) the rate of interest and (2) stability in the value of money (i.e., the rate of inflation). In other words, what is bought and sold is the service of labour, not labour itself. 4. Factors of production is an economic term that describes the inputs used in the production of goods or services in order to make an economic profit. It means that resources otherwise used to produce consumer goods are set aside for producing capital goods. (a) The spatial or geographical mobility of labour, which relates to the rate at which workers move between geographical areas and regions in response to differences in wages and job availability (e.g., a worker from West Bengal moving to Mumbai) and. Whatever the nature, duration and extent of economic activity and entrepreneur has to raise capital to organise the factors of production, and take certain fundamental decisions on what, how and where to produce. Long run production refers to the output that a firm can achieve after making changes to their machinery, factories, factory size, capital structureCapital StructureCapital structure refers to the amount of debt and/or equity employed by a firm to fund its operations and finance its assets. The supplier of labour—the worker—is also a consumer. As Stanlake has put it “The opportunity cost of the capital goods is the potential output of consumer goods which has to be foregone in order to produce that capital, the production of capital demands abstinence from current consumption.”. These two features may now be discussed in detail. Fifthly, the individual must be present when the labour services are used and thus a fifth feature is that labour services are not transferable: For example, a person who has agreed to carry out certain tasks cannot transfer his services to someone else to do the work, while he does something else. The business-person thinks of money as capital because he can easily convert money into real resources like tools, machines and raw materials, and use these resources for the production of goods. In this sense, land differs from both labour (which has to be reared, educated and trained) and capital (which has to be created by using labour and other scarce resources or by spending money).

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