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Factors of Production
Transcript of Factors of Production
If I were to start a business that manufactures surfboards, then I will need to know about the product. I will need to know where to make the surfboards, how they will be made, who will make them, and who will coordinate the process and resources required. That is what is known as the
factors of production
(land, capital, labor, and entrepreneur).
Land is where the production will take place, what raw resources I will need, and what energy source I will use to operate the tools I need to make the surfboards.
I would need an ideal location for surfing, such as a coast, but I would also have to be wary of the disastrous weather that occurs in the coastal areas.
I would also need a place that has the raw materials I need and a reliable energy source.
Land & Capital
The capital is the factor of production directly involving the factory and equipment needed in production, as well as the money I will need.
"To make money; you have to have money."
I will need special tools and equipment to make the surfboards, and to get those, I will need money to purchase them. I will also need money to pay the employees, to buy the land and resources, and to pay for anything else I would need.
Entrepreneur is the factor of production that is the skill required for bringing together the other factors and initiating and managing the production process and distributing the product. I would be the entrepreneur for the surfboard company. Without me, the company would not exist.
Labor is the factor of production describing the employees. It would be who I would hire to make th surfboards. For my business, I would most likely hire locals in the community to operate the equipment that make the surfboards and to sell them.