15.1 : Factors of Production

Production involves creating both tangible products such as smartphones and clothing, and intangible products such as healthcare services and financial advice. Factors of production are also called inputs. These are the resources utilized by a firm to produce goods and services. Land, labor, capital, and entrepreneurship are considered the four categories of factors of production.

The first input factor category is land. It includes the physical location where the factory is built, as well as the natural ingredients used in production, such as minerals, grains, and water.

Labor represents another essential input factor category. In a large company, labor comprises various roles within the organization, from engineers and assembly line workers to administrators and customer service representatives.

Capital is also a critical input factor category, which includes the machinery and equipment necessary for production. It also encompasses buildings, technology, and tools that enable the efficient transformation of raw materials into finished products.

Entrepreneurship allocates land, labor, and capital to produce output efficiently. It involves recognizing undiscovered opportunities for profitable production of goods or services, as well as willingness to accept the considerable financial risks involved in starting and running a business.