Factors of Production are the resources used for the production of goods and services.
Production is known as any type of activity that has an economic value. Any activity that generates money or income.
In Economics, land has a wider meaning compared to the English meaning of the word ‘land’. In economics, land consists of all the natural resources. For example, the atmosphere, the seas, soil, everything on the seabed etc.
The price given for the land is usually called ‘rent’
Labour is the all human efforts in the production. Labour does not only mean the labourers in an industrial site. If we take an example of a tourist resort, labour includes the receptionists, bell boys, bartenders, waiters, admin assistants, telephone operators etc.
The price given for the labour is usually called salaries and wages
Capital is the investment given to the business by the owner. It includes money input by the owner plus the fixed assets such as machinery and tools used for the production.
The price of the capital usually is interest payments.
An entrepreneur is a person or a group of people who bring together all the other factors of production. For example, the manager in a company gives direction to the plumbers, supervisors, admin assistants. He also manages the finance in the business and thinks of ways of increasing profit. The manager here is the entrepreneur.
Division of labour & Specialization
Division of labour enabled workers to become specialisedfor specific jobs. Division of labour means the work is divided into smaller tasks and each task becomes the work of one individual or group of workers. When this happens, each worker who took that special task becomes specialised at that task and quickly masters the art of performing that work.
Benefits of specialisation for the individual
1. More goods and services can be produced.
When workers become specialists in the jobs they do, repetition of the same operations increases skill and the speed of the worker and as a result, more is produced.
2. Full use is made of everyone’s abilities.
With specialisation, there is greater chance that people will be able to do things at which they are best and which interest them most. This means people can become perfect in their special abilities.
3. Time is saved.
If a person has to do many different tasks or operations, then much time will be wasted switching from one task to another. With specialisation time is saved by not having to move around.
Time also can be saved when training people. It would be difficult and time consuming to train somebody to do all the tasks required to build a complete car, but a person can be trained quickly to fulfil one operation of the process.
4. Use of machinery.
As labour is divided into specialised tasks, specialised machinery can be used which is further increase the productivity.
Disadvantages of specialisation to the individual
1. Work may become boring.
A worker who performs the same operation each and every day is likely to get very bored.
2. People become too dependent upon each other.
Due to specialisation, no single person alone is able to complete the production process. It also means that people have to rely on others for the provision of goods and services.
3. Lack of variety.
Though the number of goods produced increases but they are identical or standardized.
4.Lack of mobility
Due to specialisation workers might find it difficult to switch between occupations.