Factors of production

In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, goods and services. The utilized amounts of the various inputs determine the quantity of output according to the relationship called the production function. There are four basic resources or factors of production: land, labour, capital and entrepreneur (or enterprise).^[1] The factors are also frequently labeled "producer goods or services" to distinguish them from the goods or services purchased by consumers, which are frequently labeled "consumer goods".^[2]

There are two types of factors: primary and secondary. The previously mentioned primary factors are land, labour and capital. Materials and energy are considered secondary factors in classical economics because they are obtained from land, labour, and capital. The primary factors facilitate production but neither become part of the product (as with raw materials) nor become significantly transformed by the production process (as with fuel used to power machinery). Land includes not only the site of production but also natural resources above or below the soil. Recent usage has distinguished human capital (the stock of knowledge in the labor force) from labour.^[3] Entrepreneurship is also sometimes considered a factor of production.^[4] Sometimes the overall state of technology is described as a factor of production.^[5] The number and definition of factors vary, depending on theoretical purpose, empirical emphasis, or school of economics.^[6]

^ Deakin, Simon (December 2013). "Addressing Labour Market Segmentation: the Role of Labour Law" (PDF). University of Cambridge Centre for Business Research Judge Business School. Archived (PDF) from the original on 4 April 2023. Retrieved 4 April 2023.
^ rjonesx (18 February 2021). "Factors Of Production". Finance Reference. Retrieved 2021-08-01.
^ Paul A. Samuelson and William D. Nordhaus (2004). Economics, 18th ed., "Factors of production", "Capital", Human capital", and "Land" under Glossary of Terms.
^ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 4. ISBN 978-0-13-063085-8.
^ Michael Parkin; Gerardo Esquivel (1999). Macroeconomía (in Spanish) (5th ed.). Mexico: Addison Wesley. p. 160. ISBN 968-444-441-9.
^ Milton Friedman (2007). Price Theory. Transaction Publishers. p. 201. ISBN 978-0-202-30969-9.

[1] Deakin, Simon (December 2013). "Addressing Labour Market Segmentation: the Role of Labour Law" (PDF). University of Cambridge Centre for Business Research Judge Business School. Archived (PDF) from the original on 4 April 2023. Retrieved 4 April 2023.

[2] rjonesx (18 February 2021). "Factors Of Production". Finance Reference. Retrieved 2021-08-01.

[3] Paul A. Samuelson and William D. Nordhaus (2004). Economics, 18th ed., "Factors of production", "Capital", Human capital", and "Land" under Glossary of Terms.

[4] O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 4. ISBN 978-0-13-063085-8.

[5] Michael Parkin; Gerardo Esquivel (1999). Macroeconomía (in Spanish) (5th ed.). Mexico: Addison Wesley. p. 160. ISBN 968-444-441-9.

[6] Milton Friedman (2007). Price Theory. Transaction Publishers. p. 201. ISBN 978-0-202-30969-9.

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