Production means the creation of utility. There are four factors of production. They are land, labour, capital, and entrepreneur.
They are explained as follows:
(i) Land: In economics, the land is a wider concept. It is the primary, natural and original factor of production. According to Prof. Marshall, land means all natural resources, available on, above, and below the surface of the earth.
E.g. On the surface of the earth – mountains, rivers, forests, etc.
Above the surface of the earth – air, sunshine, etc.
Below the surface of the earth – gold, silver, coal, etc.
E.g. A landlord gets rent for the productive use of land.
(ii) Labour: Labour is a living factor of production. It is the most active and human factor of production. Any physical or mental effort undergone during the production process to earn a reward is called labour. The remuneration of labour is wages. E.g. a labourer working in a factory.
(iii) Capital: Capital refers to produced means of production. It is the stock of capital assets that yield income. Capital earns interest for its productive use. Capital is a man-made factor of production. E.g. machinery, raw material, etc.
(iv) Entrepreneur: The entrepreneur is the organizer and the controller of a business. He combines all the factors of production. He supervises the production process. He is a special kind of labourer who gets rewarded in the form of profit. An entrepreneur is regarded as a real captain of the industry.
