What Are Factors of Production
Factors of production are the primary resources utilized in the manufacturing of goods. They are the factors of production are the starting point in the making of goods. The major factors of production are land, labor, capital and entrepreneurship. Combined together at the same time, these factors lead to the production of goods. Although these factors may also refer to others such as stocks, capital goods and the ability to work, they are all generalized in as the aforementioned primary factors. It should be noted that the primary factors of production facilitate the production of goods; they never become part of the finished product. Therefore the factors of production should never be confused with raw materials such as timber, iron and grains. The primary factors of production are:
Land not only refers to the site of production, but also to the natural resources that come from it. To this end, all raw materials are products of land. It does not matter if they come from below the land, such as fossil fuel, or above it, such as timber. All naturally occurring goods for example water, air, soil, minerals, flora and fauna which are all used for the creation of goods. Without land, these resources would not be available be available to the manufacturing process. This is the single reason why land is considered as a primary source of production. To take advantage of land as a factor of production, then the entrepreneur will have to incur a cost normally referred to as rent.
So that the raw materials can be turned into a finished product, labor is required. This is where skills are used to turn a raw material into a finished consumable product. Take the example of a bed. Timber will be gathered from the land, as the primary raw material, and then a person will be required to turn this timber into the shape of a bed. This is what is referred to as labor. The human component in the process of production is what labor entails. It does not matter at which level the human resource is used; it all forms a part of labor.
These are the human made goods that are used in the production of other things. In this category we have machines that are used in the production of goods, money used to facilitate the production process and any other good that goes into the process. Going by the earlier example of turning timber into a bed, capital in this process will manifest itself in the form of hammers, saws as well as nails used.
This is the person who brings all the factors of production together to facilitate the manufacture of a consumable good. The factors of production alone cannot result in the creation of goods. But when they are out together, a finished product is achievable. The glue that holds factors of production together is what is referred to as entrepreneurship, a vital component in the four primary factors of production.