Question

What is the aim of production? What are its factors?
Or
'Every production is organised by combining land, labour, physical capital and human capital'. Explain

Answer 1

The aim of production is to produce the goods and services that we want. There are four factors of production:
(i) Land. The first requirement of production is land, and other natural resources such as water, forests, minerals.
(ii) Labour. Labour is the next necessary factor for production. Some production activities require highly educated workers to perform the necessary tasks. Other activities require workers who can do manual work. Each worker provides the labour necessary for production.
(iii) Physical Capital. Physical capital means the variety of inputs required at every stage during production. The following items come under it.
$\bullet$ Tools, machines, buildings. Tools and machines range from very simple tools such as a farmer's plough to sophisticated machines such as generators, turbines, computers, etc. Tools, machines, buildings can be used in production over many years, and are called fixed capital.
$\bullet$ Raw material and money in hand. Production required a variety of raw materials such as yarn, clay. Also, some money is always required during production to make payments and buy other necessary items. Raw materials and money in hand are known as working capital because they are used up in production.
(iv) Human Capital. The last but not the least is human capital without which we cannot produce best results. In other words, we need knowledge and enterprise to be able to put together the above three requirements of production i.e. land, labour and physical capital and produce an output either to use ourselves or to sell in the market.