Factors of Production

Factors of production is an economic term that describes the inputs used in the production of
goods or services in order to make an economic profit. These include any resource needed for
the creation of a good or service to satisfy human needs and wants. The factors of production
include land, labour, capital, and entrepreneurship.
Land is short for all the natural resources, e.g. the fertile soil vital to the growth of plants,
minerals such as coal and oil, and animals for their meat and skins, available to create supply.
It includes raw property and anything that comes from the ground. Land includes renewable
non-renewable resources. Renewable resources are a resource which can be used repeatedly
and replaced naturally, e.g. oxygen, fresh water, solar energy and biomass. Non-Renewable
rsources is a resource of economic value that cannot be readily replaced by natural means
on a level equal to its consumption, e.g. oil and gold. Once man changes it from its original
condition, it becomes a capital good. For example, oil is a natural resource, but gasoline is a
capital good. Farmland is a natural resource, but a shopping centre is a capital good. The
income earned by owners of land and other resources is called rent.
Nothing can be produced without Labour. The size and ability of a country’s labour force are
very important in determining the quantity and quality of the goods and services that can be
produces. The greater the number of workers, and the better educated and skills they are, the
more a country can produce. Although it's usually manual labour such as farm workers, it
can also be service work, such as janitorial. The next is semi-skilled labour that requires
some education or training. An example is manufacturing jobs. The reward or income for
labour is wages. 
Not everyone can successfully combine different resources and organize production in a firm,
while most people are able to contribute to the production of goods and services as workers
and employees. A firm is an organization that employs resources to produce and supply
goods and services. For example, simply buying some wood and other materials and hiring a
group of people to work together in a factory will not result in the production of tables and
chairs. Production will only take place if resources are properly organized, financed and
important decisions are taken to manage and control what they produce from day to day,
these decisions are taken within firms. The ability to organize production in a firm is known
as enterprise. The people who have enterprise, ‘business know-how’, can control, and
manage firms are called entrepreneurs. They are the people who take the risk and decisions
necessary to make firms run successfully. The income entrepreneurs earn is profits.
To make the task of production easier, we have invented many tools: pens to write with,
computers to calculate, screwdrivers, spanners, hammers, rulers, and many more. On a
grander scale, turbines drive engines, tractors plough the land, railways and ships transport
goods, offices and airport have been built. All the human-made resources used to produce
other goods and services, are known as capital. For example, capital goods include industrial
and commercial buildings, but not private housing. A commercial aircraft is a capital good,
but a private jet is not. Economists tend to talk of units of factors of production. For example,
an economist might say that a ‘firm has employed 30 more units of capital’. This could
simply mean that it has bought 30 new identical machines. Similarly, if an economist refers
to units of land, it could mean tonnes of coal, barrels of crude oil, or hectares of land.
Likewise, employees or the individual hours they work are units of labour for an economist.
The income is profit.
The main purpose of setting up a firm is to earn profit. A firm must be able to generate
enough income or revenue to cover its cost of production if it is to continue making and
selling its products or provide services. It is therefore important that entrepreneurs consider
the main four factors of production for them to successfully organise production in a firm and
earn the rewards or profits.