What are factors of production

Factors of production are called resources that are expended in the production of goods. Among them distinguish material (property) and human resources.

Among the property factors of production distinguish between raw materials and capital, human - labor and entrepreneurial ability. All of these factors are interchangeable due to limited resources. They can be used in various combinations and proportions.

All factors of production (economic resources) bring profit to their owners in the form of rent (from land), interest (from capital), salary (from labor) and profit (from entrepreneurship).

Natural resources

Natural resources include land, minerals, and water. This is all that nature has provided for human use. Natural resources are the raw materials in production.

The natural factor reflects the influence of nature on the production process and the use of natural sources of energy and raw materials in it. Despite the importance of this factor, it is a passive element of production.

Investment resources

Investment resources are also called capital. Among them are buildings, structures and equipment. Investment resources are not only factors of production, but also its sources. If assets (financial resources) are directed to the sphere of production, then they are also called capital investments.

Capital can be presented in various forms. For example, in the form of fixed assets that can attach working capital (working capital). What swings financial capital (securities), it does not apply to production factors, because not included in the real sector of the economy.

Labor resources

Labor resources - a separate category of production factors, including the physical and mental abilities of people. The labor factor in the production process is represented by the labor of the workers employed in it. When labor is combined with other resources, the production process is initiated.

The importance of labor resources in the production process is due to the fact that its course and the final result depend on them. The labor factor affects production efficiency not only in the quantity of labor, but also in the quality and efficiency of labor. That is why, in addition to the labor factor, such criteria as productivity are used in the analysis.