Microeco

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Factors of production are the inputs used to produce goods and services. The demand for a factor of production is a derived demand, meaning that the firm’s demand for a factor of production is derived from its decision to supply a good in another market. Relative to the needs and wants of businesses and human, however, the economic resources to produce them are limited and subject to scarcity. We must put resources to the most efficient use possible to maximize production. Human depend on four factors, referred to as the “factors of products”. Apart from direct inputs such as land, labor, capital and entrepreneurship include the skills, human resources, and equipment that are required to create a product.

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Land

The first factor of production is land. Land is not created by human beings but it is a gift of nature. So, it is called as natural factor of production. Land is the natural resources use to produce goods and services, not only to physical ground. Land is usually a limited resource for many economies; the resources include fossil fuels such as coal and oil and anything else not created by human. Land resources are the raw materials in the production process. The resources can be renewable such as forests or nonrenewable such as coal or oil. Everything else is scare since there is not enough to satisfy everyone’s demands. The income that resource owners earn for land resources is called rent.

Labor

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The second factor of production is labor. To make the gifts of nature satisfy our needs and desires, human beings must do something with the natural resources and this human exertion in production is called labor. Labor is an ability to work. Labor is a broad concept because it includes both physical and mental labor. Labor is a primary or human factor of production. It indicates human resource. Labor is all of the work that laborers and workers perform at all levels of an organization, except for the entrepreneur. Not all labor is...