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In the business world, however, capital is always expressed in terms of money. And the equipment they use is called capital, which refers to all man-made resources. These two features may now be discussed in detail.

It does not cause it. The supply of labour is independent of its demand: In case of most commodities we see that supply usually varies with demand but in case of labour its supply is in no way related to demand. Define production . Let us make an in-depth study of the meaning, definition, types and factors of production. The end result is that changes in the total area are really insignificant. Earlier writers used to consider management control one of the chief functions of the entrepreneur. In economics the term land is used in a broad sense to refer to all natural resources or gifts of nature. In fact, any economic activity takes place to satisfy the consumers. Circulating capital refers to funds embodied in stocks and work-in- progress or other current assets as opposed to fixed assets. Disclaimer Copyright, Share Your Knowledge It may be pointed out in this context that the same article may, at one time, be a con­sumption good and, at another time, capital, depending on the use to which it is put. And Ricardo argued that rent arises not only due to scarcity of land as a factor but also due to differences in the fertility of the soil. Thirdly, the individual sells his services but not himself: The employer, however, must be able to exert some control or authority over the actions of employees. It also means that workers must live near their place of work. “Production is the organised activity of transforming resources into finished products in the form of goods and services; the objective of production is to satisfy the demand for such transformed resources”. Secondly, it enhances the producti­vity of the other factors, viz., land and labour. But this is not the whole truth. Every laborer is unique and so his … So rent paid for this kind of fertile land is rather a mixed type of factor income. It is a mobile factor and brings in use the other factors of production like land and capital. We may now study the nature and characteristics of four factors against this backdrop. However, as wages continue to rise a stage ultimately comes when higher wages (incomes) make leisure more attractive. It may apparently seem that labour is the most mobile of all factors—both occupationally and geographically. It is to be noted that the importance of the entrepreneur has been declining with the growth of joint-stock business and state-undertakings. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. These factors might, therefore, remain idle. (1) the rate of interest and (2) stability in the value of money (i.e., the rate of inflation). Productivity and value of land can be increased if it is improved with fertilisers, irrigation and the erection of fences and buildings. It may be noted that rent is usually paid for something more than the use of land or another natural resource, but includes also an element of payment for another factor which is involved in making the resource available in a usable form. However, adjust­ments in the labour market, such as increasing the supply of a particular skill, often requires a long time. But the basic functions of the entrepreneur-organisation, management and risk-taking are the same in all industries. Another important point to note is that labour is not only a factor of production. Therefore, any change in atmos­phere has an effect on his health feelings etc. ‘Labour’ is the collective name given to the productive services embodied in human physical effort, skill, intellectual powers, etc. A firm cannot buy and sell labour in the same way that it can buy land and capital. So labour is perishable. We have already identi­fied certain things described as capital in our discussion on producers’ goods. They point out that risk- bearing is not something peculiar to the entrepreneur.

Workers can move both freely from one industry to another and from one region to another.

Capital can be classified in two broad categories that which is used up in the course of production and that which is not. Broadly, there are two kinds of risk which he has to face. Many of the old buildings used as cinema house or god-owns in northern area of Calcutta have been dismantled and converted into multi-storeyed buildings. Producers produce the commodities when they are assured by consumers that their products would be consumed. Define production explain the role of labour in production? As Stanlake has rightly put it, “any increase in the value of natural resources due to rising populations and rising incomes accrues to the owners of these resources as a windfall gain—it does not arise from any efforts on their part”.

If people choose not to buy some consumer goods, with some part of their current income, they refrain from buying (utilising) the services of the factors required to make those goods. Another distinguishing function of the entrepreneur as emphasised by Schumpeter, is to make frequent inventions- invention of new products, of new techniques and discovering new markets—to improve his competitive position, and to increase earnings. Thus, labour plays a dual role in a modern economy. The term ‘labour’ is used to refer to the flow of labour service per unit of time. are examples of capital. But enterprise is a separate factor because the first three factors are substitutable to some extent, but the fourth factor is a specific factor and cannot be substituted by any other factor. In a board sense, any product of labour-and-land which is reserved for use in future production is capital. Defined production function as “the relation between a firm’s physical production (output) and the material factors of production (inputs).” Prof. Watson In this way, production function reflects how much output we can expect if we have so much of labour and so much of capital as well as of labour etc. The next major function of the entrepreneur is to make necessary arrangement for the division of total income among the different factors of production employed by him. It means that resources otherwise used to produce consumer goods are set aside for producing capital goods. In fact, the resources of any community, referred to as its factors of production, can be classified in a number of ways, but it is common to group them according to certain characteristics which they possess. Secondly, some risks, however, cannot be insured against because their probability cannot be calculated accurately.

Production of a commodity or service requires the use of certain resources or factors of production.

In fact, production can never take place without some risk being involved; the decision to produce something has to be taken in anticipation of demand and there must be some element of uncertainty about that demand materialising. If labour is efficient, its share in national income would go up. In short, capital formation depends on savings, which, in its turn, depends on two things: The capacity to save depends on income and the existence of savings institutions like banks, insurance companies, post offices, stock exchanges, etc. So, the entrepreneur is the person who takes the charge of supervising the organisation of production and of framing the necessary policy regarding business. Some economists feel that the above entrepreneurial functions are no different from those of a particular and specialised form of labour. This two-fold function is performed by the organiser or the entrepreneur. Efficient labour force makes proper use of the scarce natural resources of the country. Profit is the reward for successful conduct of business. It refers to human effect of any kind—physical and mental— which is directed to the production of goods and services. 3. On the other hand, all jobs which do aim at satisfying wants are part of production. Before publishing your Articles on this site, please read the following pages: 1. This definition makes it clear that, in economics, we do not treat the mere making of things as production. Business firms are important components (units) of the economic system. However, new discoveries are often stimulated by high prices (as in the case of Calcutta’s Salt Lake area), and like that of oil in the U.K.’s North Sea, which tend to moderate price increases. Saving is the difference between current income and current consumption. 6. Thus, risk taking or enterprise can be considered as a fourth factor of production, and those responsible for taking these risks are usually referred to as entrepreneurs (see the box below which is self-explanatory). The basis of this consumption is labour. 4. It refers to human effect of any kind—physical and mental— which is directed to the production of goods and services. He cannot produce all of them. (b) The occupational mobility of labour which relates to the extent to which workers change occupations or skills in response to differences in wages or job availability (e.g., a jute mill worker joining a tea garden). Capital, the third agent or factor is the result of past labour and it is used to produce more goods. This is particularly true in the capitalistic or even mixed economy which is based on the price-profit system. Share Your Word File

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