In economics, economic resources are described as factors of production. They are usually classified into three groups:
These are the recourses provided by nature and not by human beings. The word land is used to describe the gift of nature. When we use the term land, it may mean any one of the following three things;
- The total land area of available to a country is fixed.
- The total cultivable area available is not fixed:-The cultivable area of land available in a country can be changed with better irrigation facilities, proper drainage system and by better use fertilizers.
- The total natural resources available in a country are not fixed:-The estimates of measures of natural resources are based on the existing knowledge and technology which may not be correct with expansion of knowledge and technology
This consists of the energies, skills and knowledge of the working population. These recourses are described as labour.
Labour means both physical and mental work undertaken for some monetary reward. Supply of labour in an economy means the total man-hours that the population is willing to supply. The total supply of labour depends on
i. The size of population
ii. The proportion of working population to the rest of population, and
iii. The number of man-hours put in by each individual.
Labour is a human factor of production and therefore, it possesses certain peculiar characteristics. These are the following
- Labour differs in quality
- Labour is inseparable from the labourer
- Labour is perishable
- Labours can organise themselves in trade union
- Labour can shift from one occupation to another or one place to another.
- The efficiency of the labourer can be improved by training and by providing better working conditions.
The efficiency of labour
The quality or efficiency of labour is also very important in determining a country’s output of goods and services .The efficiency of labour is generally known as productivity of labour and this is usually measured in terms of output per worker-hour.
The factors that determine efficiency of a labourer are the following
- Racial quality
- Food, clothing and housing
- Education and training
- Working conditions
- Management etc
Capital is the man made factor of production. It includes fixed capital like machinery, plant and equipment, building etc, working capital like raw materials, spare parts, semi finished goods, etc and social capital like schools, hospital, roads, bridges, etc
In economics, the word ‘investment ‘does not mean buying shares on the stock exchange or putting money into savings account .When investment expenditure is incurred, it results in addition to the capital stock. Investment can be either gross or net investment. Gross investment is the sum total of all types of assets produced in an economy. When we deduct depreciation from gross investment, we get net investment.
The rate of net investment in a country is a very important item. It tells us the rate at which that country’s stock of capital is increasing .Future productivity depends very much on the present rate of investment.
The person who undertakes the responsibilities and risks of employing land, labour and capital, who decides how these resources are to be used, is described as an entrepreneur.