Identify the various factors of production …

Factors which are used to carry out the process of production are called factors of production. In the modern economy, economists classified these factors into two categories. They are land and labour, as capital is created by the application of labour on land and an entrepreneur is the human resource who performs and controls the business. Therefore, land and labour are the primary factors of production, whereas capital and the human capital are the secondary factors of production.

The characteristics of the factors of production are as follows:

• Factors of production are jointly used in the production of a commodity
• Variable factor proportions
• Physical existence
• Use of factor services
• Demand for a factor or production is derived
• All factors of productions are not equally mobile.

Factors of production:

Land:

 It is defined so as to include not only the surface of the Earth but also all the other gifts of nature.

Labour:

Labour consists of all human efforts of the body or mind which are undertaken in the expectation of reward.

Capital: 

Capital is known as the produced means of production. First, it is created by man and is not a gift of nature. Second, it is a means of production and used as an input in producing other goods. Such type of goods is not directly consumed. 

Human Capital:

A human capital is a person who carries the risk of business and coordinates the activities of all the other factors of production.

Out of all the four factors of production, human capital is considered the best among all the resources. This is because it makes use of the other resources like land, labour and physical capital to produce an output while the other resources cannot become useful on their own.