Factors Of Production Flashcards
Meaning of land
—> land is defined to include not only the surface of the earth but also the free gifts of nature such as minerals, forest resources
—> according to professor marshal since these are free gifts of nature and they help indeed, are essential to the production process, they should be considered part of supply of land in the economy
—> but professor cairncross was of the view that in order to be considered a factor of production it’s supply should be amenable to human control. But factors such as rainfall and sunlight cannot be controlled by humans
Thus we can say in economics that land means not only the surface of the earth but all those free gifts of nature, the supply which can be regulated
What are the Characteristics of land
—> land is the primary factor of production because in every kind of production we have to make use of land, for example, it provides raw materials for industries and sites for industrial buildings
—> land is a passive factor of production because it cannot produce anything by itself because it needs labour and capital to produce
—> land is a gift of nature given to man for free.He makes no effort to get it. Land has no cost of production. All other factors of production have to be produced at a cost
—> land is fixed in supply whereas other factors of production can be increased in supply but it is impossible to increase the supply of land.man is helpless in increasing the supply of land
What are the functions of land
—> the agriculture development of the country depends on the quantity and quality of the land. Land also provides natural resources in the form of forests and minerals
—> natural resources promote the science and technology and make many new inventions which are useful in our daily life
—> land facilitates in the creation of transport and communication facilities like roads, telephone lines, bridges, etc which are useful facilities in connecting places with each other
Factors which affect the productivity of land
—> productivity of land is affected by the land development measures like proper drainage and irrigation
—> productivity of land is determined by the natural qualities such as fertility, slope of land, etc
—> land located near the markets are more productive than the land located further from the markets as the Farmers will not have to pay more money for transport hence the location of land also matters
—> productivity of the land also depends on the capital if there is capital to buy improved seeds and machines thus intensive cultivation gives higher productivity
—> the government of a country can play a vital role in developing the agricultural productivity of land by reducing the price of land and providing better irrigation facilities
What is the meaning of labour
Labour is the primary factor of production without which nothing can be produced
In economics the term labour is used for the human efforts done in a view to earn income
The human efforts may be physical or mental
Work done simply to attain happiness is not called labour
Thus labour is defined of all human efforts of body or mind which are undertaken in expectation of reward
what are the characterisitcs of labour
–> labour is mobile which means it can move form one place to the other and one occupation to the other. Other factors lack mobility
–> labour can improve its productivity by when the entrepreneur invsts capital on the labour’s eduaction and training
–> all labour are not effecient.some of the labour may have higher productivity due to better education and training and some of the labour will have less productivity due to illiteracy or ignorance
–> the demand for labourers is not directly demanded labourers are demanded only when the goods and services are demanded hence, the demand for labour is derived
–> labour cannot be separated from the labourer as the labourer will have to present himself where the work is going on
–> labour is an active factor of production as without labour, land and capital cannot produce anything labour is also a living organism and requires sympathetic treatment
what is the menaing of division of labour
–> By division of labour we mean specialisation in work which means under it the worker specializes in a single commodity or a single sub-process
–> the worker would perform the activity to which he is suited most
–> according to adam smith the division of labour is defined as a system whereby the operations necesary to make a finished product are so minutely divided that each worker performs at most 1 operation
efficiency of labour meaning
–> by effieiciency of labour we mean productive capacity of a worker. It indicates the capacity of a labourer more work or better work or both in a given period of time
–> hence effieciency of a worker is a relative concept.
reasons for low effieiciency of the indian labour
–> since india is a subtropical country it has hot weather which is the main cause of low effieciency of indian labour
–> since most of the machines used in industries are old and broken down this causes a downfall in the efficiency of labour
–> because the wages of labourers are low labourers are poorly fed and clothed and such the labourers are in no position to work
meaning of capital
–> capital in the terms of physical or tangible capital used by producers it does not include financial capital such as money, bonds, stocks and other securities
–> capital is not a free gift of nature. it is a produced means of production and is produced by man
–> capital refers to the stock of capital goods such as tools, machines, truck, etc.
4 characteristics of capital
–> capital is man made not a free gift of nature. capital is a mixed result of past labour of workers working on natural resources. since, human labour is applied to natural resources to generate capital. capital thuus involves a cost
–> capital is a mobile factor as it is easily transferrable from one place to another and also from one occupation to another
–> the supply of capital is elastic which means it can be increased or decreased unlike land which is fixed in nature
–> capital is a result of past savings as it is increased in stock only after saving money and reinvesting in it hence capital is called the outcome of savings
differentiate between fixed capital and circulating capital
–> fixed capital is the capital which is used again and again for further production of goods
–> for example office furniture, building
–> circulating capital is the capital which is used in production only once.they are also called single use producer goods
–> raw materials and fuel
differentiate between sunk and floating capital
–> it is the capital which can be put to a single use it is also called specialised capital it always remains at the place where it is fixed
–> for example printer
–> floating capital is the capital that can be used In alternative lines of production it is also called free capital
–> for example wood, electricity, raw materials
differentiate between renumerative and auxillary capital
–> the payment made to workers for their contribution to the production of a good is called remunerative capital
–> all man-made goods that help labor in the
the production process is called auxiliary capital
differentiate between material and personal capital
–> material capital is the capital which is in tangible form and can be transferred form one person to another
–> example are machines tools etc
–> personal capital comprises of all those energies, faculties, and habits which contribute to make people efficient
–> examples are art of singing, painting, dancing, writing, etc
what is real capital
it is the physical stock of goods which are used as inputs in the production process
it is also called concrete capital
the contribution of real capital towards increase in national output of any country is more important than the money capital because money capital does not necessarily contribute to the increase in national output
what is money capital
the term is used to describe capital in terms of money
money itself is not the means of production but used for purchasing capital goods like machines and raw materials
it would not be wrong to treat the money used for this purpose as capital
what is debt capital
it consists of title to wealth like shares and debtenture
they represent invested funds and yield income
for example if an individual invests in icici bonds he will earn fixed interest income on the value of these bonds
these bonds are considered as debt capital
differentiate between production and consumption capital
–> production capital is the capital which helps the labour directly in production
–> for example raw materials, machines, tools
–> consumption capital is the capital used for the direct satisfaction of a worker’s want it consists of goods which indirectly help the production process
–>for example food and clothes to workers
differentiate between internal and external capital
–> the capital which is the result of domestic savings in the country is called internal capital
–> such capital has source within the country
–> capital which is imported from abroad and used by the recipient of the country is called
–> for example capital received to indian from world bank
what is human capital
it refers to the stock of people in a country equipped with education, skills, and health etc.
helps people produced more goods
the process of improvement in human capital is called human capital formation
meaning of capital formation
–> by capital formation we mean increase in the stock of capital goods like machines tools transport facilities etc
–>in order to make capital goods society has to divert its productive resources from production of consumer goods to production of capital goods
–>the system of replacing old assets by new assets is called maintaining capital intact
–> if total investment in any country is more than this deprication cost then there will be more capital formation
capital formation = total investment - deprication
meaning of entreprenuer
the task of bearing risks is called enterprise and the person who bears these risks is called of business is called an entrepreneur
–> all other factos of production are employed in the production process but entreprenuer is not a hired factor of prodcution
–> risk and uncertainity bearing is the key job of the entreprenuer
–> reward of the entrepreneur is in positive or negative but reward of all other factors are positive
functions of entreprenuer
- -> risk bearing
- -> decision making functions
- -> coordination. and supervision
- -> innovative functions
