The functions of the enterprise are undertaken by a single individual, the entrepreneur. The second function of enterprise is to organise other three factors of production to produce goods and services. The first function of the enterprise is to take the financial risk by making investment in the business. As a factor of production, the enterprise has two main functions. The person having this ability is called an entrepreneur. The ability of a person to take financial risk and organise other factors of production (land, labour and capital) into a unit capable of producing goods and services is called enterprise. Examples of CapitalĬapital covers a wide range of items such as factories, office blocks, machinery, trucks, computers, information technology, transport vehicles and infrastructure in the form of roads, railways, pipelines, electricity supplies, water supplies and so on. As a factor of production, 'capital' means physical capital which helps in producing more resources by firms and governments. Robots are considered as capital, not labour. So, cash is not a physical capital as it is not productive. Capital means physical capital or capital goods and not financial capital. Capital is a type of physical resource including anything that can be regarded as made by humans to aid production. CapitalĪll man-made resources used in producing goods and services are called capital. Human effort provided by full-time, part-time, permanent and temporary workers including managerial staff. It is the quality of labour used in production. The more the human capital, the more productive workers will be. Human capital is a feature of labour which means the knowledge, skills, training and experience of workers which are used in producing goods and services. Robots are not considered labour because they are not human beings. The basic determinant of labour is the nation's population. The mental and physical services provided by workers are called labour. Economists consider labour as the human effort provided by employees in producing goods and services. The physical and mental services provided by workers are called labour. This factor of production includes a wide range of things such as raw materials, mineral deposits like oil and coal, natural gas, the earth's rivers and lakes, the surface of the earth land itself, fish, trees, fruits, agricultural land and all other things made by nature. It means all the natural resources on, above or below the surface of the earth. Economists consider labour as the human effort provided by employees LandĪll natural resources used in producing goods and services are called land.

There are four factors of production which are land, labour, capital and enterprise. Production processes cannot take place in the absence of factors of production. In economics, this concept is called scarcity of resources. Image illustrating the production process.įactors of Production or resources are limited or scarce. Production means the process of converting inputs (FOPs) into outputs (goods and services). The resources or inputs needed by firms for the production of goods services are called the factors of production.

Example of four factors of production