Explain the requirements to produce goods and service in the production process. Or Explain the Factors of Production.
Answer :
Every production is organised by combining the factors of land, labour, physical capital and human capital, are known as Factors of production.
The first requirement is Land and other natural resources such as water, forests, minerals.
The second requirement is Labour : The people who engage physically and mentally in the productive process is called Labour. It can be classified into
Trained Labour such as Engineer, Supervisor, accountant etc.
Untrained Labour such as loading & unloading workers, manual workers etc.
The third requirement is Capital : The variety of inputs required at every stage during production is taken as Capital. It can be classified into Fixed & Working capital
Fixed Capital / Physical Capital : Building, Furniture, Tools and machines range from very simple tools such as a farmer's plough to sophisticated machines such as generators,turbines, computer automated machines etc are not used up or consumed immediately in the production process. and used over many years.
Working capital : The various raw materials, chemicals etc required in the production process and money is required to buy these and other materials. So the requirement for raw material and money is called working capital
The fourth requirement is
Technology and Enterprise / Human Capital : To be able to use land, labour and physical capital in a meaningful way to produce some goods or services, knowledge of the process of production and confidence is essential. Owners of the physical capital or managers hired by them to provide this knowledge.