Factors of Production
Factors of production are the resources used to produce goods and services. These resources are typically divided into four categories: land, labor, capital, and entrepreneurship. Land includes all natural resources, such as minerals, forests, and water. Labor refers to the human effort used to produce goods and services. Capital includes the tools, machines, and buildings used to produce goods and services. Entrepreneurship is the risk-taking and decision-making involved in the production process.
History of Factors of Production
The concept of factors of production was first developed by the 18th-century economist Adam Smith. Smith argued that the division of labor and the specialization of workers were the most efficient ways to produce goods and services. He also argued that the division of labor was the key to economic growth. Smith’s ideas were later expanded upon by other economists, such as Karl Marx and John Maynard Keynes.
Comparison of Factors of Production
| Factor | Definition |
|---|---|
| Land | Natural resources, such as minerals, forests, and water |
| Labor | Human effort used to produce goods and services |
| Capital | Tools, machines, and buildings used to produce goods and services |
| Entrepreneurship | Risk-taking and decision-making involved in the production process |
Summary
Factors of production are the resources used to produce goods and services. These resources are typically divided into four categories: land, labor, capital, and entrepreneurship. The concept of factors of production was first developed by the 18th-century economist Adam Smith. For more information about factors of production, visit websites such as Investopedia, The Balance, and the U.S. Bureau of Labor Statistics.
See Also
- Division of Labor
- Specialization
- Economic Growth
- Karl Marx
- John Maynard Keynes
- Supply and Demand
- Opportunity Cost
- Marginal Analysis
- Productivity
- Incentives
