Chapter-2

Factors of
Production
NAZMUN NAHAR
LECTURER, DEPT. OF MARKETING
 Contents
Concept of Factors of Production
Elements/Factors of Production
Concept and Features of Land
Concept and Features of Labor
Types of Labor
Division of Labor
Types of Division of Labor
Mobility of labor
Concept and Features of Capital
Formation of Capital
Steps of Formation of Capital
Concept and Features of Organization
Classification of Organization

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

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Factors of Production
Land

Organization Labor

Capital

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 “Land means the materials and the forces which nature gives freely
for man’s aid”- Marshall
Features of Land
Natural gift
Concepts No production cost

and
Limited supply
Original and indestructible

Features Difference in quality

Non-transferrable

of Land Alternative use

Influencing law of diminishing return
Perpetual
Lands are not homogeneous

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“Labor is any exertion of
mind or body”- Marshall
“Labor is the number of
hours people work in
producing goods and
Features of Labor
Concepts
services”- Taylor
Human element
Labor inseparable
and
Nontransferable ownership
Mobility of labor
Preservation is not possible
Features
Less bargaining power
Personal presence
Labor is also consumer
of Labor
Increasing supply of labor is time
consuming
Higher wages does not increase
labor supply

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Types of Labor

Physical Mental
Labor Labor

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 Concept of
Division of Labor
“Division of labor is dividing
work into different tasks with
groups of workers specializing
in each task”- Taylor

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Types of Division of Labor
Professional division of
labor
Complete process of
division of labor
Incomplete process of
division of labor
Geographical division
of labor

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Mobility of Labor

Geographical Industrial Occupational

Stair mobility
mobility mobility mobility

Horizontal Vertical
mobility mobility

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 Efficiency “Efficiency means achievement of
the ends with the least amount of

of Labor resources”- Koontz

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Concept and Features of Capital
“Capital is a fund and income or its flow”- Marshall

“Capital refers to that part of a man’s wealth which yields an income”- Dewett

Features of capital
• Capital is productive
• Consequence of savings
• Produced means of production
• Production cost
• Capital is temporary
• Save time
• Capital is not homogenous
• Mobility
• Sources of income
• Tied with effort

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 “The amount which a community
adds to its capital during a period is
known as capital formation during
Capital that period”- Benham
Formation
Capital Formation = Total
production - Consumption

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 To create financial savings
• Ability of savings
Phases of • Desire of savings
• Investment facilities
Capital
Collecting financial savings and
Formation providing loan

Converting financial savings into

capital

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 “Organization is a human structure through which people
may exchange goods and services”- Taylor

“Organization is two or more people who worked together in

a structured way to achieve specific goal”- Stonner

Organization Features
and Its • Objective oriented

Features •
•
Coordinate effort
Division of labor
• Classification of work
• Distribution of responsibility and power
• Relationship development
• Unity of command
• Controlling system
• Optimum span of supervision
• flexibility

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Classification of Organization

Sole Joint stock Cooperative

Partnership
proprietorship company society

Business State
Joint venture
alliance organization

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