ppt

1. Meaning of productionand factors of
production
Meaning of production?
The process and methods used to transform tangible
inputs (raw materials, semi-finished goods,
subassemblies) and intangible inputs (ideas, information,
knowledge) into goods or services. Resources are used in
this process to create an output that is suitable for use or
has exchange value.
EG: Man takes out coal from the earth; the extraction of
coal is production. Man does not produce the coal as
nature as produced it. A carpenter produces a chair or a
table from wood; but he does not make wood which is
actually a product of nature.
Factors of production :-
Factors or agents of production refer to those goods or
services without which production is not possible. E.g.:
paper, printing press, labor, land, bullocks,
plough, seeds, tools etc are all factors of production.

2. They are called factors of production because they help in
the production of goods.
Generally we speak of four main factors namely:
1. Land
2. Labor
3. Capital
4. Entrepreneurship
1.land :-
Ordinarily when we speak of land, we refer to the space
upon which we build our homes, farms and factories.
In economics we speak of land as a factor of production
and hence we refer to not only the soil but all the natural
resources which we find on the ground, beneath the
ground in the water and in the air.
“Land therefore refers to all natural resources- the materials
and the forces which nature gives freely for aid in land and
water, in air, light and heat”.
Natural resources may be defined as all those gifts of
nature which manses to produce goods and services
which satisfy his wants. Land refers to the sea,
lakes, river valleys, mountains plains etc. on which
depends the prosperity and wealth of the country. Thus
natural resources or land constitute an important factor
production. A country which is blessed with plenty of
natural resources can become rich and prosperous.
However one must realize that resources are useless

3. unless man is prepared to use them and has the
necessary knowledge and ability to use them.
The following are the characteristics of Land:
 Land is a free gift of nature
 Land is limited in area
 Land is not perishable/It is permanent
 Land lacks mobility
 Land is of infinite variety/Land varies in quality
 Land differs in location
2. labor :-
In ordinary language, labor refers to the work done
manually or it refer to the workers who use their hands
and feet .In economics the term labor refers to “
the inclusion of all efforts made by mad to earn a living”
If a person uses his energy and exerts his mind and body
with the motive of getting an income, he is engaged in
labor.
Hence labor is defined as
“Any effort physical or mental made to earn a living”
The following are the characteristics of Labor:
 The worker and his services go together.
 The worker sells only his services.
 Labor is perishable.
 The worker cannot separate himself from the
services.

4.  Wages alone do not influence labor.
 Supply of labor is peculiar.
 Supply of labor changes slowly.
 Labor is mobile but labor mobility is low.
Man is not a machine, Difficulty of calculating
cost of production, Labor differ in efficiency
and laborer do not have the same power of
bargaining as their employers.
3. Capital :-
Generally when we speak of capital we refer to it as
money but in economics the term capital is used in a
much wider sense. It refers to all man made goods which
are used in production. They are also known as
producer’s goods or capital goods. Capital includes tools,
equipments, machinery, buildings, transport equipment,
raw materials etc. All these goods are regarded as wealth
but they will be capital provided that they are used in
production. Thus capital is wealth but wealth is not
capital.
The are two types of capital that we speak of:-
a.Constant or Fixed Capital
b.Variable or Circulating Capital
a.Constant or Fixed Capital :-
It refers to the initial investment in installed capacity that
is investment in buildings, machines, tools etc. The fixed
cost of a firm remains fixed irrespective of level of
output production, whether the firm produces of units of

5. output or infinite units of output, the fixed cost remains
the same.
b.Variable or Circulating Capital:-
Variable cost is that cost which varies with the level of
output. Lesser the production, lower the variable cost
and larger the production higher the variable cost.
Variable cost examples: raw material costs, taxes etc.
The following are the characteristics of capital are:
 Capital is man-made-it is not a gift of nature.
 Capital is not fixed in quantity and can be increased
and decreased.
 Capital is perishable.
 Capital is mobile.
 Capital in each group is identical or homogeneous.
4. Entrepreneurship :-
In the past production was carried on in the house of
workers or in small workshops. The worker in olden times
himself possessed the tools he required supplied the
capital he wanted, owned his own land or house, and
planned the operation himself. He was the landlord, the
worker, the capitalist and the organizer al rolled in one.
But conditions of production and market have changed
considerable these days. Production is no more simple. It
is organized on a large scale and had become highly
complex. Besides factors of production are owned
separately and sometime may even lie scattered. A

6. cotton textile mill in Coimbatore engages over 5000
workers who come from all over Tamil Naidu and Kerala,
Its capital is supplied by shareholders, spread over the
whole of India but also in other countries. It becomes,
necessary therefore for someone to bring all the factors
of production together, co-ordinate them, supervise and
manage them. Such a person, or often a group of
persons known as the organizer or the enterpriser of
entrepreneur.
“Entrepreneur” is a French Word which is now
commonly used by economists to refer to the
person or persons who perform the task of
organizing and managing a business.
The functions of an entrepreneur are therefore:
 He decides about what he will produce, where he
will produce, where he will produce and how he will
produce it.
 He coordinates the work of the different factors of
production.
 He anticipates the future demand and future prices.
 He introduces a new idea or a new commodity, a
new process or some new machinery.
 He busy raw material and sells the finished goods.
 He represents the business before the government
or with other enterprises.
Conclusion

7. In short he is the one who must take all the decisions
regarding the organization running and management of
the firm. In performing these functions the organizer
assumes many risks and bears a heavy responsibility.
The entrepreneur is not a paid manager. He is the one
who acts as boss and who decides as to how the business
should be run; he is not paid any fixed wages. The
entrepreneur himself is not employed by anyone and is
not paid a fixed salary.
Submitted by:-sunny mehriya
Section - C
Enrollment no. :- A30101913086