The four main factors of production are land, labor, capital, and entrepreneurship. Land refers to natural resources and is fixed in supply. Labor represents all human effort, both physical and mental. Capital consists of man-made resources used to create more wealth and comes in two forms: fixed capital for durable goods and working capital for goods that change form during production. Entrepreneurship organizes the other factors and takes risks to coordinate production.

1. Factors of Production.

2. Factors of Production
The resources used in the production of goods and
services are classified into the following categories
 LAND
 LABOUR
 CAPITAL
 ENTREPRENUER

3. Land
Land refers mainly to the resources provided by
nature, e.g. Soil, sunshine, rain, minerals, forests, and
fishing grounds.
Characteristics
It is completely immobile i.e. it is geographically fixed.
It is fixed in supply – its quantity can not be increased.
It is the gift of nature – i.e. it has no cost of production
as man did nothing to bring it into existence.
Its value varies with its location- land in urban areas
commands a higher price than land in rural areas.

4. Land cont’d
 It is liable to the “law of Diminishing marginal
Returns”.
Economic Importance of Land
Land provides the site necessary for production.
ii. The natural raw materials needed for production.
i.
Reward for Land is called ...........

5. Labour
 Labour is all effort of man both physical and mental,
made by human beings in production
 Characteristics
 The quality of labour refers to whether labour is
skilled, semi-skilled or unskilled
 Quantity of Labour: the size of a country’s labour force
(working population) depend on the country’s total
population, school leaving age, retirement age, etc.

6. Importance of Labour
 Without human effort Production is not possible.
 Even in mechanised production, some effort of man is
still required for production to take place.
 Reward for land is ...................

7. Law of Diminishing Returns

9. Capital
 Capital is defined as wealth set aside for the creation of
more wealth.
 Capital can also man- made resources used in the
production of other goods and services.
 Capital is required for the production of both
consumer goods and capital goods.

10. Types of Goods
 Consumer goods are goods which are directly need to
satisfy consumer wants e.g.ipod, a pair of jeans etc.
 Producer goods are used for the production of other
goods e.g.machinery, factory building e.t.c.

11. Types of capital.
 Fixed Capital involves all producer goods which are
very durable and do not change their form after
production. E.g. machinery, tools etc.
 Working capital also called circulating capital refers to
goods that are required regularly for production and
which change forms entirely after production. E.g. raw
materials like wheat change its form to flour which is
further used for making bread, pizza, meat pie,
doughnut etc.
 Reward for Capital is ...............

12. Economic Importance of Capital
 Capital is very important for the following reasons:
 It increases production.
 New products and innovation. More variety.
 Increased standard of living.
 Improves efficiency of other factors of production.

13. Entreprenuer