Factors of production
Definition
Factors of production refer to the resources used in the production process to create goods and services. These resources include land, labor, capital, and entrepreneurship.
Analogy
Think of factors of production as ingredients needed to bake a cake. Just like how you need flour, eggs, sugar, and butter to make a cake, businesses need land, labor, capital, and entrepreneurship to produce goods and services.
Related terms
Land: Refers to all natural resources used in the production process such as forests, minerals, and water.
Labor: Represents the physical and mental effort exerted by individuals in the production process.
Capital: Includes all man-made tools, machinery, buildings, and equipment used for production purposes.
"Factors of production" appears in:
Subjects (1)
Study guides (2)
Practice Questions (1)
- What are the 4 Factors of Production?
Resources
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