Factors of Production

This refers to the inputs or resources from the society that are used in the process of production .They include land, labour, capital and entrepreneurship

Land It refers to all natural recourses over which people have power of disposal and which may be used to yield income. It includes farming land, forest, river, lakes, building land, and mineral deposit. The total supply of land in the world is limited although the supply of land for some particular use is not fixed. Thus for example, more maize can be planted at the expense of potatoes. Alternatively, more land can be allocated to buildings at the expense of farming land, drainage, irrigation and fertilizers can increase the area of agricultural land.

Labour refers to the exercise of human mental and physical effort in the production of goods and services. The supply of labour in an economy is measured the number of hours of work which is offered at a given wage rate at a given period of time. Capital is a manmade input. It can be classified as working capital or circulating capital referring to stocks or raw materials, partly finished goods and goods held producers.

Alternatively, capital can be classified as fixed capital which consists of equipment used in production such as machinery and buildings. The value of total output required for replacement of won out producer goods every year is referred to as depreciation. The total output of producer goods is referred to as the gross investment and any addition to capital stock is referred to as the net investment.

This implies that: Gross investment – Depreciation = Net investment
Note that in economics, the concept of depreciation is distinct from the concept of depreciation in accounting. Depreciation is considered to be the period allocation of the cost of a fixed asset

Entrepreneurship the organizational of the factors of production with a view to make a profit It involves hiring and combining other production factors making decision on what to produce how and what and where to produce. It in involves risk taking which arises because most production is undertaken in expectation of demand and in most cases the future is uncertain. Entrepreneurs make payments to cover their costs without any certainty that the cost will be covered revenue.

Mobility of Factors of Production has two main aspects

  1. Occupational mobility refers to the ease of movement of factors of production from one job or task to another.
  2. Geographical mobility refers to the movement factors of production from one location to another.

Individual mobility of factors of production
Land is not mobile geographically but has a high degree of occupation mobility i.e. land can be put into different uses of farming building roads etc Capital is mobile in both cases e.g. a vehicle and tools are geographical and occupational mobile. Some capital are immobile e.g. railways. Other form of capital has occupational mobility e.g. a building

Labour is mobile both geographical and occupation. However there are barriers to geographical and occupation mobility.

Barriers to Mobility of Labour

1) Reluctance of the family to move
2) Cost involves in labour mobility
3) Language barriers
4) Adverse climatic condition
5) Insecurity and political instability
6) Ignorance of job opportunities

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