Basic Economic Activities: Production and Factors of Production

Production is one of the four basic economic activities.

 

Production can be defined as the conversion of resources or raw materials, with the help of other inputs, into usable goods and services. It turns raw materials into finished goods with other inputs.

It is the process of manufacturing, producing, or developing user-friendly goods and services, employing various means and resources that are available in an economy.

Man can not consume goods in their raw form in most of the cases. Even the food grains and other foods require some form of processing to be edible. 

The raw materials and resources need to be processed, tanned, and tamed to be utilised by markets. 

For example, production of cars, buses, trains, etc. requires the steel to be first mined in its raw form, then melted, and moulded to build their frames and shapes. It requires engineering skills, labour force, and financial capital (for purchasing the raw iron/steel, machines and tools for moulding, and for payments to labour, etc). 

Further, it requires the skills of efficient management for the controlling and overseeing of various processes as well as efficient usage of inputs.

So, production implies utilisation of resources as well as the other input factors of production. 

Here one should notice that only those inputs which become a part of the output, or are consumed and used up during the production process, or help in producing those goods are to be treated as the real factors of production.

Factors of Production

There are four important factors of production without which production may not be possible. They are as follows:

• Land,
• Labour,
• Capital and
• Entrepreneurship. 

Now, let me give a brief account of these factors of production as to their importance in production.

1. Land

Land is one important factor of production. Land is used for building plants and factories, offices, and for the cultivation of food grains, vegetables, and plantations, as well as for trees. So, land provides the foundational base for businesses. 

Furthermore, soil fertility is used for agricultural production. Again, land contains rivers and lakes that provide water for production units, besides serving fisheries and internal transportation. 

Land is the base for all our minerals, oils, and other production activities.

2. Labour

Labour is required to perform all physical tasks as well as other skilled operations in order to produce something.

Purely physical labour includes lifting of heavy materials, ploughing of soil for agriculture, construction work, and other unskilled jobs like helpers and servants.

Skilled labour requires special talents in the field through education and training, like engineers, technicians, and draughtsmen.

All of these professionals aid in the production of goods and services as their time and energy are consumed in the process.

3. Capital
Capital is one more important factor of the four factors of production. 

You can't do any business without capital. 

Production requires the accumulation of resources, which are procured by paying money or equivalent before starting any production. So, you have to invest capital before starting production or establishing any kind of business.

Even after accumulating the required resources, you have to pay for the services utilised for land, labour, and other intermediary activities before you may start earning income or profits from the business. 

So, capital is one important factor of production.

4. Entrepreneurship
Even after all your resources and inputs have been procured to start your production, you still need some managerial skills and talents to run your production process. 

You need to organise everything in a planned and systematic manner to enable production. 

You need to know what to produce, how much to produce, and the inputs required for the planned output. 

You should be able to calculate and predict things prudently and efficiently to produce maximum output with the available limited resources.

So, entrepreneurship plays an important role in production, and you can't ignore it.