What Does Factors of Production Mean?

Factors of Production are the things people need to produce goods and services.
They are split into four categories.

Factors of Production

Land Labour Capital Entrepreneurship

The Four Factors of Production

Land Labour Capital Entrepreneurship

The physical
space and The workforce The money and The ideas and
natural or people. the equipment. drive.
resources.
The Four Factors of Production

Economists believe that all four factors -

land, labour, capital and
entrepreneurship - are needed to
successfully produce a good or supply a
service to satisfy the needs and wants of
the community.

Let’s take a closer look...

So, You Want to Run a Cake Stall.
You’ve decided to set up a cake stall on the footpath outside your house. You are
hoping to make a profit by selling some delicious cakes! 

You have a lot of things to think about before you start baking.

Where you are going to set up your stall.

Who is going to run it.

How much your cake ingredients will cost.

What equipment you will need.

What great cakes you are going to sell.

Land
Where are you going to set up your cake stall?
The physical space you need to run your business is a land factor of
production. 

It also means the land needed to grow or extract the natural materials you need
for your business. Like the wheat crop and sugar cane needed to produce the
flour and sugar you need for your cakes.
Labour

Who is going to run your cake stall?

The people it takes to produce a good or

supply a service is a labour factor of
production. People (labour) make a
business run.

So you are going to run the cake stall, but

you might need your mum or dad to help
preheat the oven or drive to the store to
buy ingredients. These are all examples of
labour.
Capital
What equipment will you need?

Equipment, machinery and any supplies

businesses need to successfully sell
their product or service is a capital
factor of production too, just like
money. Machinery and equipment are
assets to your business. An asset is
anything owned by a business (or
person) that has monetary value. 

You will definitely need a mixer, an oven, a fridge and cake pans to make your
product. These all fall under the capital factor of production. You will also need
a table, chair, cash box, serving plates and cutlery. These are capital, too.
Capital
How much will your cake ingredients

$
cost?

Money is a capital factor of production.

Businesses need capital (money) to start
their venture in the first place, and
money to continue trading in the
future. 

You will need to make sure you have

enough money to afford the cake
ingredients and decorations. You’ll also
need to make sure you have enough
money for napkins or paper plates for
your customers to take their cakes
away.
Entrepreneurship
What great cakes are you going
to sell?

Businesses start with an idea

and good ideas along the way
help a business to succeed.
Good ideas are those that meet
the business’ goals. One of the
most common business goals is
to make a profit. 

You will need to decide what kind of cakes you are going to sell and make sure
that they don’t cost you too much to make - otherwise your profit will
disappear!
Entrepreneurship

Entrepreneurship isn’t just the good

ideas, it’s the drive (or effort) it takes to
turn those good ideas into success. 

You will have to work really hard to

bake, decorate, serve, and clean up after
your cake making. Then you will have to
try really hard to sell them! 

All of this effort and drive is an

entrepreneurship factor of production.
The Four Factors of Production

Whether it is a simple cake stall or big business, the principles are the same. The
four factors of production are needed to successfully produce a good or supply a
service to the community.