Factors of Production
Pick up a simple loaf of bread. Before it reached you, it needed wheat grown on land, farmers and bakers to work it, tractors, ovens and a shop to process and sell it, and someone with the idea and courage to organise the whole thing into a business. Those four ingredients, land, labour, capital and entrepreneurship, are the factors of production: the resources that every economy uses to make the goods and services we need. This chapter is your first step into economics. We will meet each factor in turn, discover the special role of human capital (the skill and knowledge of people) and technology, and finally see how the four factors must work together in the right balance to produce anything at all. By the end, you will be able to look at any product, a phone, a meal, a haircut, and name the factors that created it.
Learning Outcomes
By the end of this chapter, you will be able to:
- explain what factors of production are and name the four of them;
- describe land (all natural resources), labour (human effort), capital (tools and money for production) and entrepreneurship (organising the rest);
- explain human capital and why education, skills and health make labour more productive;
- explain the role of technology as a helper that boosts production;
- show how the four factors must be combined in the right proportion, using everyday examples.