Have you ever wondered how the world would be if nothing was ever produced? Think about it, then you get to appreciate production and the effort put into it at various levels every day, all year round.
As an entrepreneur, you are either producing or selling products of
a production process.
In this article, I’m going to be explaining what production means, the factors of production and the characteristics of the various factors of production.
Production is defined in various ways by different people. Production simply is the conversion or processing of raw materials into semi-finished or finished goods.
INPUT (Production process) OUTPUT
Production involves processing of inputs or raw materials into output or product.
IMPORTANCE OF PRODUCTION
Production process is very important as it is the reason there is availability of various products from a single raw material. It gives people an opportunity to have various alternatives of a product. It also encourages creativity among entrepreneurs. Production provides employment opportunities at different levels.
Almost everything around us is a product gotten from several production processes. The canned foods, appliances, clothing, books, vehicles etc. These are all results of production.
FACTORS OF PRODUCTION
The factors of production can be referred to as determinants or requirements that work together to give finished products. The factors of production play unique roles in a successful production process. All factors of production are important for production to take place.
These factors of production work hand in hand with one another to ensure the conversion of inputs into outputs. There are basically four factors of production. They are as listed below;
LAND: This factor of production is fixed and immobile. Here, land refers to all free gifts of nature including water, air or even minerals. Any natural resource that is used in the production process are classified under the land factor of production. The quality of this factor of production depends on its capacity and efficiency in the production process. The income or reward for land is rent.
LABOUR: This refers to various manpower or skill put into the production process. Labour could be classified as skilled, unskilled, semi-skilled, and professional labour. That is to say that labour can be physical or mental input. The reward for labour is wages or salary.
CAPITAL: This is the factor of production that points to capital investments. It can be said to be the direct opposite of Land as explained above. Capital involves all man-made resources put into the production process. Buildings, machineries and processing equipment used in production are all classified under capital. The reward for capital is interest.
ENTREPRENEUR: This is you! You are a factor of production! You know what that means? It means you’re important in the production process. In fact, you as an entrepreneur, are the most important factor of production. The entrepreneur manages all other factors of production to ensure a successful production process. Other factors of production are useless until an entrepreneur utilizes them towards the production of goods. How efficient an entrepreneur is at managing other factors of production, goes a long way to determine the output rate of a production process. The reward for an entrepreneur for managing the risks of production is profit.
An entrepreneur answers the economic question of; what to produce? How to produce? And for whom to produce? The entrepreneur is the brain of the production process.
However, production cannot take place without any of the factors of production. Therefore, none of the factors of production functions individually. They work together to effect production and improve the economic growth of a nation.
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