Question

What is the aim of production? Explain the four factors of production.

Answer 1

Aim of production is to produce goods and render services to the economy.

a) The first factor of production is land, but this includes any natural resource used to produce goods and services. This includes not just land, but anything that comes from the land. Some common land or natural resources are water, oil, copper, natural gas, coal, and forests. Land resources are the raw materials in the production process.

b) The second factor of production is labor. Labor is the effort that people contribute to the production of goods and services.

c) The third factor of production is capital. The income earned by owners of capital resources is interest.

d) The fourth factor of production is entrepreneurship. An entrepreneur is a person who combines the other factors of production - land, labor, and capital - to earn a profit.