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. The reward for labour is wages and salaries.
The supply of labour in an economy is a measure of the number of hours of work which is offered at given wage rates over specified period. Labour is also unique in that it is the reason why economic activities take place. It should be noted that labour is distinct in that it is the services of labour that are bought and sold and not the labour itself. It refers to human efforts both mental and physical directed towards the production of goods and services. 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.Īlso Read What are Operational Decisions and Their Role in Business? 2) LabourĪmong the four factors of production, labour is another one that possesses greater significance in an economy. 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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