Factors of production

The factors of production are the inputs to the

production process. Peter Smith summarises
their key characteristics
Capital Land
This involves physical (produced) resources such This factor involves natural resources used as
Enterprise as machinery and transport equipment. It can be inputs to production. Land itself is highly inelastic Energy
less flexible than labour as it may take time to in supply, and commands rent as payment for
Entrepreneurs get new machinery or buildings into operation. the services it provides. This is another input
organise production that is key to the
and identify production process,
potentially profitable and highly contentious
projects, bearing given that so many
the risk. Enterprise sources of energy
provides dynamism are non-renewable
and innovation in an resources.
economy.

Environment Labour
This is perhaps not a This factor involves
factor of production human resources
in the normal sense, OUTPUT as inputs to the
but can be regarded production process,
as an input used in The factors of production encompassing
production, especially combine to produce output different skills. It is
with the use of non- in the form of finished relatively flexible as it
renewable resources. goods and services. can be varied in the
short run.

Bottled sunflower oil

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16 Economic Review February 2015 17