The Economic Factors of

Production

5th October 2021

Agriculture Science
Mr. Andrews
BSc, Dip. Agriculture Science
Objectives:
1. Relate the factors of production to agriculture

2. Explain the concepts of value chain and supply chain

3. Explain the relationship among production, marketing and consumption

4. Relate changes of demand and supply to pricing

5. Explain the law of diminishing returns.

 Introduction
Factors of production is an economic term that describes the inputs used in the
production of goods or services to make an economic profit.

These include any resource needed for the creation of a good or service.

Resources - a stock or supply of money, materials, staff, and other assets that can be
drawn on by a person or organization in order to function effectively.

Scarce resources - the lack of available supplies or a limited amount of supplies required
to maintain life, or a certain quality of life.

Scarcity is a never ending problem for economic theory, which often assumes that humans
have unlimited wants but must find ways to fulfill these wants using scarce resources.
The farm as an economic unit
Farming is a business and a farm can be defined as an economic unit
engaged in the production and sale of agricultural produce for
maximum profit.

A farm may produce crops or livestock or sometimes the farm can be a

mixed farm.
Marketing
(Driver)

The Economy: vehicle of

change and development
Consumption Production
(Fuel) (Engine)

Economic Functions
 The farm as an economic unit cont.
Farms consist of different sections, each section is focussed on the production of one
type of crop or livestock. Each section of the farm is known as an agricultural enterprise.

A farmer manages each enterprise by deciding;

• How much to produce.
• How to allocate resources to obtain
Marketing
high yields and maximum profit. (Driver)

To accomplish these the farmer

must have knowledge on the production Consumption Production
(Fuel) (Engine)
process and understand
Market demands.
Economic Functions
 The factors of production
Agricultural production varies according to the amount, quality and
effective use of these essential resources:

• Land
• Labour
• Capital
• Management / Entrepreneurship

These factors are known as the factors of production or inpuits

 Land
This is an essential resource from which a product is derived. Especially in
agricultural production.

• Land as a factor of production is a limited resource and cannot be

created.
For this reason, in the Caribbean a system of sharecropping arrangement
are observed.

Land provides a site where production can take place

YouTube links:
• Click the YouTube link below to view a video on the factors of the
production.