Q. 35.0( 3 Votes )
In every production, we produce goods and services that we need in our life. To produce them, we require many things which are known as factors of production:
• The first factor of production is land or any other natural resources like forests, minerals etc.
• The second factor of production is labour. Labour are the people who will work to produce goods and services. There are two types of labour: skilled labour and unskilled labour.
• The third factor of production is physical capital. Physical capital is the inputs which are used at various stages of productions. There are two types of physical capital: fixed capital and working capital. Fixed capital includes those assets which can be used over many years in the process of production like machines in factory, building, tools etc. Working capital includes raw materials which will be converted into finish goods and money in hand which will be required to purchase raw material or any other item during production.
• To make use of land, labour and physical capital efficiently, we will need somebody who acquires knowledge of producing goods and services. Without human capital, Land, labour and physical capital are meaningless.
The above points clearly show that every production is organized by combining land, labour, physical capital and human capital. Without these factors of production, production of goods and services is not possible.
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