Factors of production:

Every production is organised by

combining land, labour, physical capital

and human capital, which are known as

factors of production.

The aim of production is to produce the

goods and services that we want. There

are four requirements for production of

goods and services.

1.The first requirement is land, and

other natural resources such as water,

forests, minerals.

2.The second requirement is labour, i.e.

people who will do the work. Some

production activities require highly

educated workers to perform the

necessary tasks, called skilled labour.

Other activities require workers who can do manual work,

Called unskilled or manual labour/worker.

Each worker is providing the labour necessary

for production.

3.The third requirement is physical

capital, i.e. the variety of inputs required

at every stage during production.

a.Tools, machines, buildings can be used

in production over many years, and

are called fixed capital.

b.Raw materials and money in hand are called working capital.

Unlike tools, machines and buildings,these are used up in production.

4.fourth requirement knowledge and enterprise to be

able to put together land, labour and

physical capital and produce an output

either to use yourself or to sell in the

market. This these days is called human capital.