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What Are the Factors of Production in Business?

Factors of production are the resources required for the generation of goods and services.

4 major groups of production

  1. Land (including all natural sources)
  2. Labor (including all labor resources)
  3. Capital (including all man-made resources)
  4. Enterprise (which pass all the preceding resources as one for production)

All business either it is profitable or non-profitable, need resources in order to operate.

4 Ms

The factors are also classifies as

  • Management
  • Machines
  • Materials
  • Money

Break down Factors of Production

Natural Sources

Natural resources have two elementary characteristics

  1. They are found in nature, and
  2. They can be used for the making of supplies and services.

In order to provide benefit people initially have to discover them and then figure out how to use them in the production of a good or service.

A number of natural resources are land, trees, wind, water, and minerals.

This includes not just land, but everything that comes from the land.

Some widespread land or natural resources are water, oil, copper, natural gas, coal, and forests.

Land resources serve up as raw materials in the production process. These resources can be renewable, such as forests, or nonrenewable such as oil or natural gas.

The earnings that resource owners earn in return for land resources are called rent.


Labor called as human resources (also called human capital)physical or intellectual.

You are adding up to your own human resources right now by learning.

You may have power over certain human resources already maybe you have an athletic gift that enables you to play professional ball to earn a living, for example but you can also expand them through job training, education, experience.

If you have ever been rewarded for a job, you have contributed labor resources to the production of goods or services. The earnings earned by labor resources is called wages and is the prime source of income.

Finally, labor brings creativity and innovation to businesses. Businesses use human creativeness to address changes in consumer preferences and to make up goods and services that consumers haven’t even imagined yet. With no creativity, innovation would stall, and economies would stagnate.


Imagine capital as the machinery, tools and buildings humans use to produce goods and services.

Some widespread examples of capital include hammers, forklifts, conveyor belts, computers, and delivery vans.

Capital diverges based on the worker and the type of work being done. For example, a doctor may use a stethoscope and an assessment room to provide medical services.

The income made by owners of capital resources is interest.

In contrast to natural resources, capital is a reserve that has been produced but is also used to fabricate other goods and services.

In the last decades or so, businesses have faced unparalleled technological change and have had to meet the demands of consumers whose lives increasingly take place in a virtual world.

More or less every business has a Web presence, and many customers are more adapted to interacting with a virtual version of the business than a brick and mortar store.


An entrepreneur is someone who is keen to risk his or her time and money to start or run a business usually with the hope of earning a profit in return.

Entrepreneurs have the capability to organize the other factors of production and transform them into a business. With no entrepreneurship many of the goods and services we munch through today would not exist.

An entrepreneur is a person who mingles the other factors of production such as land, labor, and capital to make a profit. The most unbeaten entrepreneurs are innovators who find new ways produce goods and services or who develop new goods and services to bring to market.

Entrepreneurs are an essential engine of economic growth helping to build some of the largest firms in the world as well as some of the small businesses in your neighborhood.

Entrepreneurs bloom in economies where they have the freedom to start businesses and buy resources freely.

The payment to entrepreneurship is profit.

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