Factors of production are the basic resources used in the production process in order to produce economic goods and services. Economists have classified the factors of production into four groups namely:
1. Land
Land is defined as the natural resources used in the production of goods and services. Land is occupationally mobile and geographically immobile.Some natural resources are renewable whilst others are non-renewable The reward for land is rent.
This is free gift of natures either on the surface or in the earth. The value based on quality and location. Return to the land is fees. Examples are land, air, water, forest and others.
2. Labour
In economics, labour is defined as any human effort, physical or mental, skilled or unskilled done for a reward and not for the pleasure derived from it. Labour is a human resource. Labour is both geographically and occupationally mobile. The reward for labour is salary or wage.
The services contributed by people in the production process that involve both mental and physical effort. That’s include the skill and unskillful. Return to the labour is wages. Examples are lectures, construction workers and others.
3. Capital
In economics, capital is defined as the man - made goods used in the production of goods and services. Examples include, factory building, factory machines …etc used in the production. Capital is divided into working capital and fixed capital.
Human made resources which are used in the production process to produce other goods and services. Return to the capital is interest. Examples are machinery, raw material, buildings, tools and others.
4. Entrepreneurship
• Entrepreneur is the person who organizes land, labour and capital for production to achieve profit.
• Enterprise is the entrepreneur’s willingness and ability to bear uncertain risks and to make decisions in a business.
• Enterprise is the most mobile factor occupationally and geographically.
This human creation is including the tools, machinery, and raw material is uses in production process. Return to the entrepreneurship is profit.