Organisation of Production
The aim of production is to produce thegoods and services that we want. Thereare four requirements for production of goods and services. The first requirement is
, andother natural resources such as water,forests, minerals. The second requirement is
, i.e.people who will do the work. Someproduction activities require highly educated workers to perform thenecessary tasks. Other activities require workers who can do manual work. Each worker is providing the labour necessary for production. The third requirement is
, i.e. the variety of inputs requiredat every stage during production. What are the items that come under physicalcapital?(a)
Tools, machines, buildings:
Tools andmachines range from very simple toolssuch as a farmer’s plough tosophisticated machines such asgenerators, turbines, computers, etc. Tools, machines, buildings can be usedin production over many years, andare called
Raw materials and money in hand:
Production requires a variety of raw materials such as the yarn used by the weaver and the clay used by thepotter. Also, some money is alwaysrequired during production to makepayments and buy other necessary items. Raw materials and money inhand are called
.Unlike tools, machines and buildings,these are used up in production. There is a fourth requirement too. You will need knowledge and enterprise to beable to put together land, labour andphysical capital and produce an output either to use yourself or to sell in themarket. This these days is called humancapital. We shall learn more about
in the next chapter.•In the picture, identify the land, labour and fixed capital used in production.
A factory, with several labourers and heavy machines
Every production is organised by combining land, labour, physical capitaland human capital, which are known asfactors of production. As we read throughthe story of Palampur, we will learn moreabout the first three factors of production.For convenience, we will refer to thephysical capital as the capital in thischapter.
Farming in Palampur
1.Land is fixed
Farming is the main production activity in Palampur. 75 per cent of the people who are working are dependent onfarming for their livelihood. They could be farmers or farm labourers. The well- being of these people is closely related toproduction on the farms.But remember that there is a basicconstraint in raising farm production.Land area under cultivation is practically fixed. Since 1960 in Palampur, there has been no expansion in land area under