It could be in the forms of stocks, shares, loans, and debentures. The former consists of such things as tools, equipment, buildings, fixtures, means of transport, as well as raw materials in the process of manufacture, and inventory for sale.Ĭapital fund, on the other hand, refers to money or cash that is available for investment in business enterprises. To better appreciate this input of production, we classify it into two forms: capital good and capital fund. These productive assets are not wanted for their sake (the satisfaction they yield), but because they help to produce other commodities. 3) CapitalĬapital refers to all human-made productive assets used to further production. If there is a limited amount of labour or if a country contains a larger percentage of unskilled labour than the potential for economic growth is reduced and vice versa. In economic systems, growth is determined by the size and quality of labour force available. This way, they can improve production processes for turning natural resources into consumer goods. This means that economies must carefully use the land resource by creating a mix of natural and industrial uses. This is because governmental regulations prevent people from claiming anything for themselves because if this were to happen, then there wouldn’t be enough resources for everyone. It is however limited as previously mentioned, together with the resources on it. Land, therefore, is an essential part of the production. As an input of production, the reward of land is rent. Alternatively, more land can be allocated to buildings at the expense of farming land.ĭrainage, irrigation, and fertilizers can increase the area of cultivated land. Thus, for example, more maize can be planted at the expense of wheat. The total supply of land in the world is limited although the supply of land for more particular use is not fixed. Land includes farming land, building land, forests, rivers, lakes and mineral deposits. The land is taken to refer to all the natural resources over which people have the power of disposal and which may be used in creating goods and also to yield an income. There are four factors of production: land, labour, capital and entrepreneurship and understanding these factors, as well as the role they play in the economy, is of great importance. These inputs are the resources that businesses in a country use to create income and wealth. Thus, every act that increases the ability of the good to satisfy human wants is a part of the production.Įconomic systems rely on certain inputs known as factors of production to operate efficiently. In the case of wheat, it will involve tilling the land, plant the wheat, harvest the after yield, transport the wheat to production areas, grind it, bake bread and there after availing it the market for the general population (consumer) to buy and consume. This, therefore, means that production starts right from the ground. It, however, is not only limited to creating things, but it also involves doing everything possible to ensure that the goods produced can satisfy human wants. Production by definition is the utilization of available economic resources to create things that satisfy human wants e.g.
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