This factor involves human services and efforts for the production of goods or services. Land 2. Production technology: an improvement of production technology increases the output.This lowers the average and marginal costs, since, with the same production factors, more output is produced. It includes all physical and mental efforts that are made by employees during the production process. It is focused on providing goods and services keeping in view various aspects, such as financial, commercial, and industrial. For explaining the importance of division of labor, he cited an example of pin making in an organization. Implies that an entrepreneur should keep putting repetitive efforts or different actions to get over the obstacles. As a promoter, an entrepreneur conducts feasibility studies, decides the form of organization, assembles the required resources, such as capital and human resource, and shapes up the enterprise. Some of the functions of an entrepreneur are described as follows: Implies that an entrepreneur identifies business opportunities, selects the most suitable business opportunity, and converts that opportunity/idea into a successful business venture. In general terms, capital refers to the part of an individual’s income that is used for Income creation purposes. Question|Asked by savannahlacook5. Factors of production are the inputs needed for the creation of a good or service. Labor is commonly thought of a group of unskilled labor working in factories. In case of labor, supply of labor decreases with an increase in prices (wages) and vice versa. An enterprise is an entity, organization, or undertaking that is created for commercial purposes or business ventures and requires efforts. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. On the other hand, if an organization has enough capital to purchase advance technology, then it would prefer to reduce the number of labor. natural resources) describes all naturally-occurring resources (e.g. Consequently, the productivity of the organization would be affected. The factors of production include land, labor, entrepreneurship, and capital. The factors of production can be used as complementary as well as substitute of each other. The factors of production are sometimes also referred to as producer goods and services because they are mainly used in the production of other goods and services (i.e. Land as a factor of production is sometimes also referred to as natural resources. According to Stingier, “the division of labor is not a quaint practice of eighteenth century pin factories; it is a fundamental principle of economic organization.” Therefore, division of labor is useful to an organization in many ways. Apart from this, land cannot be regarded as capital because of the dissimilarities between the characteristics of land and capital. According to Schumpeter, “An entrepreneur characteristically innovates, introduces new technologies, increases efficiency, productivity, or generates new products or services. These factors include land, labor, capital, entrepreneurship, and technology. Secondary factorsinclude materials and energy. If these 18 processes are performed by a single worker, it would not be possible to complete the whole function or it may take much time to produce a single pin. The are two kinds of factors of production. Labour 3. This factor of production includes machinery, tools, equipment, buildings, and technology. Labor as a factor of production refers to the human effort that is used in the production of goods and services. Additionally, he/she should need to develop technical skills to understand, communicate, and lead the technical staff of the enterprise. In this type of division of labor, the processes are performed by specific cities or towns that are specialized in it. It includes all naturally-occurring resources such as soil, water, air, plants, etc. He/she identifies and traps the existing opportunities in the market, converts idea into action, bears the risk and uncertainties involved, and takes promotional activities to launch the enterprise. Labor refers to the human effort that is used in the creation of goods and services. Search for an answer or ask Weegy. Natural resourceshave two fundamental characteristics: (1) They are found in nature, and (2) they can be used for the production of goods and services. Labor is the human effort that can be applied to the production of goods and services. They include the following: Communication. The four factors of production describe all the inputs or resources that are used in the production of goods and services. They describe all the inputs or resources that are used in the production of goods and services. iv. The utilized amounts of the various inputs determine the quantity of output according to the relationship called the production function. Implies that division of labor leads to innovation of new ideas because the work becomes mechanical rather than mental. Therefore, a nation should have an adequate amount of capital to invest in various economic development projects, such as construction and renovation of infrastructure. They are therefore called the factors of production. This site uses cookies (e.g. This may discourage individuals to think freely and generate ideas. Moreover, capital also plays a major role in economic development by raising productivity. In the basic production function inputs are typically capital and labor, though more expansive and complex production functions may include other variables such as land or natural resources. 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