2. What are the factors of production?
Factors of production are those inputs used in the
production process to produce the outputs (finished goods
and services).
There are mainly four factors of production.
Land
Labour
Physical Capital.
Human Capital.
3. Land (Natural Resources)
The first factor of production is land.
However, in economics, by land, we mean all that is given to us free
by nature.
This includes not just land, but anything that comes from the land.
Most of the natural resources like soil, water, forests, minerals,
petroleum, sunlight, wind etc come under the category of land – the
first factor of production.
Note: The income that the owners of the land earn in return for
land resources is called rent.
4. Labour (Human Resources)
While natural resources are one factor of production, human
resources are another.
The second factor of production – Labour – includes all
efforts of human beings used for the production of goods
and services. Labour include physical and mental labour.
Note: The income earned by labour resources is
called wages.
5. Physical Capital (Man-made Resources)
Capital includes all the man-made resources used for
producing goods and services like buildings, machines,
equipment, vehicles, stock of materials etc.
Capital denotes all tools humans use to produce goods
and services. For example, a stethoscope is the capital
of a doctor.
6. Sectors of Indian Economy
Three sectors – Primary, Secondary and Tertiary.
Primary = Agriculture related.
Secondary = Industry related.
Tertiary = Service related.
Sector share towards GDP :
Tertiary (60%)> Secondary (28%)> Primary(12%).
Sector share by working force :
Primary (51%)> Tertiary (27%) > Secondary (22%)>
7. TYPES OF SECTORS
Primary sector: describes all industries that are engaged in the
extraction of natural resources or the production of raw materials.
Ex: farming, fishing, mining
Secondary sector: includes all industries that are concerned with the
manufacturing of usable products or finished goods. It is often
divided further into heavy industry (steel, chemical, automotive) and
light industry (food, apparel, cosmetics).
Tertiary sector: describes all industries that provide services to other
businesses or final consumers. Ex: retail, healthcare etc
8. Conti…
Quaternary sector includes all industries that are
concerned with the creation and distribution of
knowledge. This sector has emerged a few years ago
as a further distinction of the tertiary sector.
Ex: Research and development, Education etc
Quinary sector – Highest levels of decision making in
an economy
