Production requires combining factors of production - land, labor, capital and entrepreneurship. A short-run production function uses existing capital and labor, while a long-run function allows installing new capital. Labor refers to human effort in production and is determined by population, participation rates, and efficiency. Capital consists of man-made wealth yielding income and plays a vital role in modern production. Entrepreneurship involves starting businesses, identifying opportunities, and organizing resources to produce goods and services for profit. Together these factors of production are essential for economic growth.

4. Introduction to Production
Short Run
Long Run
Land
Labor
Capital
Entrepreneurship

5. Production refers to all the activities
undertaken to provide goods and services
for satisfying human wants for which
people are willing to pay a price.

8. 1-Production of goods
2-Production of services

10. 1-Change in form of material
2-Change of place of availability
3-change in time of availability

15. Teaching
Haircutting
Consulting
Hospitality
Gym
Lawyers

16. Economy
Consumer
wants
Business

17. Q=K+L
Where
Q = quantity of output
K is the amount of capital
L is the amount of labor used in production

18. 0 1 2 3
0 0 0 0 0
1 0 2 4 6
2 0 4 8 12
3 0 6 12 18
Capital
Input
Labor Input

20. A short-run production function refers to
that period of time, in which the installation of new
plant and machinery to increase
the production level is not possible.

21. Long-run production function is one in which
the firm has got sufficient time to install new
machinery or capital equipment, instead of
increasing the labor units.

23. Inputs that are used for the
production of goods or services with
the aim to make economic profit.

24. Steel from iron ore
Legal services like medical , hospitality
etc.

25. Land
Labor Primary
Do not depend on
previous economic
activity
Capital
Organization
Secondary
Result of some
economic factor

26. Factors of
Production
Land
Labor
Capital
Organiza
tion

28. Labor refers to the human effort
that goes into the production of
goods and services with the
aim of receiving a reward

29. • Owner ship of labor doesn't belong to
firm
• Laborers need to be physically present
• Labor can’t be stored
• Geographical and occupational mobility
of labor is relatively low
• Labor is heterogeneous
• Use of labor is a bargaining process
• Labor cannot be increased on a short
notice

31. • The more is the
quantity of labor
the more is the
output potential

32. • Population growth
• Labor participation rate
• Migration

33. Labor quality can be increased
by
• Increased education
• Skill development
• Motivation
• Personal traits
• Good relation of employees

35. In return for providing
firms with labor services,
the owners of these labor
services receive
remuneration in the form
of wages and salaries,
royalties, commissions,
management and
consultancy fees,
bonuses and fringe
benefits (housing,
medical aid, pension

36. •The higher the demand for
goods and labor the higher
the wage.
•The more valuable a person
is to a firm, the more willing it
will be to pay a higher wage.
•Wage differentials also occur
because jobs are different.
•Wage differences are also
caused by geographical and
occupational immobility.
•Larger the firm higher the
wage.

37. 44
Total size of working
population of a country along
with their productive abilities
is called labor force.

38.  Labor force is determined by three point of
view
 Labor force-population ratio
Pakistan participation rate is 33% which
is very low.
 Rate of employment of labor force
 Efficiency with respect to age, skills and

40. There are five types of mobility
• Geographical mobility
• Occupational mobility
• Horizontal mobility
• Vertical mobility
• Social mobility

42. “Capital consists of all
kinds of wealth, other
than free gifts of nature,
which yield income.”
Marshall

43. • Capital and Money
• Capital and wealth
• Capital and Land
• Capital and Income

44.  Man produces Capital
 Capital is a passive factor of
production
 Capital is a produced means
of production
 Capital is variable
 Capital Depreciates
 Capital is stored up labor

45.  Financial Capital
 Material Capital
 Living Capital
 Social Capital
 Intellectual Capital
 Spiritual Capital
 Cultural Capital

46.  Supply of raw materials
 Supply of appliances and
machinery
 Provision of subsistence
 Provision of means of
transport

47. Economic development
Employment
Productivity of capital refers to the ratio
between quantity of output and the amount of
capital used.
Physical Capital Money Capital

48. • Combination of factors
• Quantity of labors
• Proper use of Capital
• Use of complementary goods and
equipment
• Quality of Raw material
• Better Technology
• Research for adaption to local
conditions
• Maintenance and repair facilities
• Management and supervision

49. Capital formation means
increasing the stock of real
capital in a country

50.  The greater the extent to which
the people are willing to abstain
from present consumption, the
greater the extent that society will
devote resources to new capital
formation
Three stages of capital formation
 Creation of savings
 Mobilization of savings
 Investment of savings

51.  Capital plays a vital role in the
modern productive system.
 Nature cannot furnish goods
and materials to man unless
he has the tools and
machinery for mining,
farming, forestry, fishing, etc.

52.  With the growth of technology and
specialization, capital has become more
complex and is of superior and advanced
type. More goods can be produced with
the help of capital.
 Much economic development is not
possible without making and using of
capital.
 Accumulation of capital goods every year
greatly increases the national product or
income.

53. “The shortage of capital
accumulation is the main
obstacle in the way of
economic development.”

54.  Act of saving
 Mobilization of saving
 Investment of saving
The stock of capital goods can
be built up and increased
through two main sources
1. Domestic Resources
2. External Resources

55.  Domestic Resources
1. Voluntary Savings
2. Involuntary Savings
3. Individual Savings
4. Public Savings
5. Deficit Financing

56.  External Resources
1. Foreign economic assistance
a. Foreign loans bridge saving gap
b. Provides greater employment
opportunities
c. Increase in productivity of various
economic sectors
d. Increase in real wages
e. Increase in tax revenue

57. a. Humanitarian ground
b. Self interest reasons
i. Foreign aid
ii. Surplus products
iii. Financial and technical help

60. The capacity and
willingness to develop, organize
and manage a business venture
along with any of its risks in order
to make a profit.
Example:
Starting of new businesses.

61. An entrepreneur is the
one who brings
resources, labour,
material and other to
produce a socially

62. A person with a
vision and action
plan to achieve it is
an entrepreneur.

63. Identification of
opportunities
Introduction of a new
product
Gathering resources or introducing new
methods of production
Developing new markets

65. Vision
Knowledge
Desire to succeed
Independence
Optimism
Initiative
Goal setting
Value Addition
Problem Solver
Good human relations

66. Aggressive/
Innovative
Fabian
Drone
The one who uses
factors of
production to
assemble and
engineer new and
innovative
products.
The one who
makes bold
decisions.
A drone
entrepreneur is one
who refuses to
adopt new
innovations even at
the cost of reduced
returns.
According to Clarence Banhof

67. Empirical entrepreneur
An entrepreneur who does not
innovate and follows the rule of
thumb.
Rational entrepreneur
An rational entrepreneur is one
who keeps himself updated with his

68.  Large scale entrepreneur
Found in developed countries
Introduce revolutionary ideas
Sustain high profits
Develop new technologies
 Small scale entrepreneur
Do not have the necessary funds.
Do not have technology to initiate large scale production.

70. Creation of Enterprise
Organizing Function
Innovation
Risk Bearing Capacity
Leadership function
Gap filling

71. 1.Identify an opportunity
2.Establishing a vision
 An entrepreneur evaluates different opportunities
and business environment to assess the
 Perceived values of the product
 Risks and reward associated with the project
 Differential advantages in its competitive environment
3.Persuade others

72. Resources can be categorized as:
 Financial resources
 Operating resources
 Tangible
 Non tangible
 Human
 Information
5.Create new venture
6.Adapt with time

73. Primary functions
 Secondary functions
Diversification of production
Expansion of the enterprise
Tackling labor problem
Coordinating with third parties
Other functions
Managing of scarce resources
Identifying parallel
opportunities

74. Environmental barriers
 Raw material
 Labour
 Machinery
 Land and building
 Infrastructure support
Financial barrier

75.  Lack of confidence
 Lack of dependability on others
 Lack of motivation
 Lack of patience
 Sense of pride/embarrassment

76. Societal Barrier
 Socio-culture norms and values
 Financial stability
 Degree of disapproval of entrepreneurial
behavior
Political barrier
 Interest in economic development of society
 Facilitating the socio-economic setting

77.  Desires of control over one’s
future
 More profits
 Lack of employment opportunity
 Reducing the monopoly
 Growth of economy

78. Conclusion:
Real economic growth only comes from
increasing quantity and quality of
factors of production. Hence, we can
say that no factor is important, yet every
factor has its own importance.
Therefore,
Production =capital + land +labor +
entrepreneurship
So the producers must select proper
combination of the factors of production