The main factors of production

By making material goods, a person acts on natural objects, gives them the desired shape, after which they become suitable for satisfying needs. In this process, people are helped by a wide variety of elements and conditions that have a decisive effect on the final result. These conditions relate to factors of production.

The concept of factors of production

The main causes of production activities and the conditions in which the creation of an economic product occurs are called production factors. In a certain sense, they are the driving forces of production, an integral part of the production potential.

In the simplest case, production factors are understood as the triad “labor, land, capital”, which embodies the labor and natural resources involved in creating the product. Recently, entrepreneurship has been called one of the significant factors. However, such a list will not be exhaustive.

In Marxism, the conditions of production include labor, the subject and means of labor, considering personal and material factors. The personal totality of a person's abilities to work includes personal ones. Marxist methodology ranks the material means of production in a complex system, in which a special place is given to the organization of production and technology. The latter refers to the interaction between all factors of production.

The main factors of production in marginal theory:

• Natural resources;

• work;

• capital;

• entrepreneurship;

• scientific and technical factor.

Natural factor

The natural factor embodies the natural conditions in which production processes take place. As sources of raw materials and energy are widely used substance, minerals, earth, water, air, flora and fauna. Being a factor of production, the natural environment allows the use of natural resources that serve as raw materials in the manufacture of the product. All variety of material products is made on the basis of such raw materials.

The energy basis of production is the Earth and the Sun. At the same time, the planet becomes a production site on which the means of production are placed, where workers work.

One of the most unique resources at present is land, because its supply is limited. This type of material conditions of production is a territory where there are natural resources and minerals. The usefulness of the land resource is assessed by its ability to be suitable for agricultural work and biological reproduction.

The natural factor appears in the triad as a passive component. However, in the course of transformations, objects of nature pass into the main means of production and gradually acquire an active role. In some factor economic models, the natural factor is taken into account in an implicit form, which by no means reduces the degree of its influence on production processes.

Labor factor

Labor is presented in a number of factors of production as an element that is designed to initiate the production process. This category is represented by the labor of workers who are directly involved in the creation of benefits. At the same time, the concept of “labor” embodies a diverse number of activities that direct production and accompany it at all stages. Labor consists in the direct participation of man in the transformation of resources (energy, matter, information). People contribute to the manufacturing process by spending physical and mental efforts. All its participants bring their labor into the production process, each form of labor ultimately affects the result.

In macroeconomic models that use the resource approach, when considering the main factors of production, it is often not labor as such that is allocated, but labor resources, that is, the able-bodied population or the total number of those engaged in productive activities. It is important to understand that the labor factor is manifested, inter alia, in the quality of labor, in its effectiveness, in labor return.

Labor is the most important economic category, since its costs determine the effectiveness of the established organization of production. Through labor activity, a person actively affects the subject of labor. The intensity of the labor process affects the complexity and the amount of time spent on the manufacture of the product. These data reveal the problems that production is facing.

The amount of labor determines other economic categories - unemployment and employment. The structure of the workforce includes all people who, one way or another, take part in production in accordance with their labor skills. Human activity has a peculiarity: labor is formed over the years, it requires continuous renewal. For successful work, an employee must maintain useful skills and always be in good physical shape.

Capital as a factor of production

Under capital understand the means of production, which are involved and directly involved in the manufacture of an economic product. Capital can appear in production activities in a wide variety of forms; different may be ways of accounting for it. If human labor creates only a condition for production, then capital becomes the goal, purpose and mode of existence of production activity. Therefore, capital in importance is often put above labor.

This factor is expressed in both physical and monetary capital. Physical capital is the main means of production. Working capital also becomes the most important material resource and source of activity for the production of an economic product. In the long run, the factor includes investment.

In short, capital refers to any type of property used for profit. For this purpose, from the moment of the appearance of industrial society, investments (capital investments) directed into production are widely used in it. In its material form, the invested funds are converted into fixed assets and become factors in the production process.

According to some economists, after labor capital takes the second place among other conditions for the success of economic activity. Recently, human capital is increasingly being allocated, including the knowledge, skills, professional experience that an employee possesses in it. Other researchers do not consider it appropriate to introduce such a category, since its content is largely covered by the labor factor.

Entrepreneurship as a factor of production

Entrepreneurial activity and initiative favorably affect the results of production activities. The difficulty is to quantify the effect of this factor. Measuring such an effect is extremely difficult. Therefore, this factor is judged, as a rule, exclusively in terms of quality. The value of entrepreneurial activity is that it increases and enhances the return of the labor factor.

Entrepreneurial ability consists in the ability to combine all factors of production in order to create a product with maximum efficiency. Being an entrepreneur means:

• be able to make decisions;

• take reasonable risks;

• be able to organize workers to complete tasks.

The main factors of production and types of income

Each of the dominant production factors creates a certain type of income:

• labor corresponds to wages;

• land - rent;

• equity - interest;

• Entrepreneurship - profit.