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Factors of Production Learning Objective: Introduction To Factors of Production and Land and Its Characteristics

This document introduces factors of production and discusses land and its characteristics. It defines factors of production as the resources required to produce goods and services, categorizing them as land, labor, capital, and organization. Land refers to natural resources and includes materials from the earth, air, water, and minerals. As a factor of production, land has distinctive features - it is a gift of nature, fixed in supply, varies in location, immobile, and requires human effort to be productive. The productivity of land depends on factors like climate, rainfall, soil structure, irrigation, and capital investment. The document concludes with sample questions to test understanding of factors of production and land characteristics.

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36 views

Factors of Production Learning Objective: Introduction To Factors of Production and Land and Its Characteristics

This document introduces factors of production and discusses land and its characteristics. It defines factors of production as the resources required to produce goods and services, categorizing them as land, labor, capital, and organization. Land refers to natural resources and includes materials from the earth, air, water, and minerals. As a factor of production, land has distinctive features - it is a gift of nature, fixed in supply, varies in location, immobile, and requires human effort to be productive. The productivity of land depends on factors like climate, rainfall, soil structure, irrigation, and capital investment. The document concludes with sample questions to test understanding of factors of production and land characteristics.

Uploaded by

RohitPatial
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Lecture20

Factors of Production
Learning objective: Introduction to factors of production and Land and its
characteristics
Production means a creation of value in the goods. Production consists in creating
utility in goods for the satisfaction of human wants.
Production activity helps in transforming a set of inputs into goods and services.
It essentially means a transforming of one set of goods into another. The output
which comes out of production has greater utility over the inputs combined in the
production process. The inputs that are used in production of goods may be
provided by the nature and/or by other industries. According to Adam Smith the
production of a thing is complete only when it is in the hands of the consumers.
According to Dr. F.G. Fairchild production consists of the creation of utility in
wealth.
The factors of production means the production resources required to produce a
given product.
Fraser defined factors of production as a group or class of original productive
resources.
The factors of production have been traditionally classified as Land, Labour,
Capital and Organization.
In the theory of production; it is assumed that the entrepreneur aims at
maximizing his profits. A profit- maximizing entrepreneur will seek to minimize
his cost for producing a given output, or to put it in another way; he will
maximize his output for a given level of outlay.
Land
Land, as ordinarily understood, refers to earths surface. But in economics, the
term land is used in a very wider sense. It does not mean surface soil only but
includes all those which are the free gifts of nature.
Marshall defined land as the materials and forces which nature gives freely for
mans aid in land and water, in air and light and heat.

Land refers to those natural resources that are useful and scarce. In other words,
land stands for all natural resources, which yield an income or have an exchange
value.
In land we include all those natural forces which are above or over the earth like
air, light, rainfall, sunshine, etc; which are on the earth like rivers, forests, lakes,
vegetables, etc; and which are beneath the earth like coal, iron, copper, oil,
minerals, etc.
Characteristics Features of Land:
Land as a factor of production has the following characteristic features:
Land is a free gift of nature. Labour efforts, howsoever great, cannot create even an
inch of land. It is given to us free of charge by nature.
Land is limited in supply. We cannot increase the supply of it. If our needs for it
neither increase, nor can we decrease the supply of it, if our needs for it decrease.
All the lands are equally well or ill situated. Some lands are situated near the market
and other away from it.
Land is immobile i.e. it cannot be transported from one place to another. Products of
land are mobile (wheat, cotton, jute, etc. can be transported from one place to
another), but land itself is immobile.
Land has original and indestructible qualities. These cannot b destroyed because these
are given by nature. It is, no doubt, true the man tries to improve upon its qualitiesaccording to his abilities but the basic qualities cannot be changed or destroyed.
Land is a passive factor of production because it cannot produce anything by itself.
Man has to invest money and apply labour to produce something out of it.
The price of land depends upon its situation. Lands which are near the water (rivers
and canals) or neat cities command higher prices than lands situated away from water
or cities.
Land and its productivity
Productivity of land means the capacity of the land to produce. It is also called the
efficiency of land, which depends on the following factors

Relief
Climate
Rainfall
Situation
External factors
Soil structure
Irrigation
Capital
Organization
Proper use
State patronage
Before studying the different theories of factor of production, let us discuss the
characteristics of different factors
Questions

1 Supply of land is
a) Variable
b) Fixed
c) Both a and b
d) None of the above
2 The number of factors of production is
a) One
b) Two
c) Three
d) Four
3 A profit- maximizing entrepreneur will seek to
a)
b)
c)
d)

Minimize his cost for producing a given output,


Maximize his output for a given level of outlay
Both a and b
None of the above

4
Answers
1 b)
2 d)
3 c)

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