Definition of Factor of Production and its Characteristics

Definition of Factor of Production and its Characteristics

1. Definition of entrepreneur

The ability to combine the other three factors of production to produce goods and services to satisfy consumer demands. Or

An entrepreneur is a person who brings land, labor, and capital into one place and uses it for the production process.

He/she is the person who decides

• What to produce?
• How to produce?
• Where to produce?

The person who takes these decisions along with the risk associated with them is known as an "entrepreneur"

Characteristics of an Entrepreneur:

• He must be a good administrator.
• He must possess complete knowledge.
• He must be a person of imagination.
• He must be a man of action.

2. Definition of Capital

Capital means man-made resources or things which help us in the further production of goods and services, which is called capital.

Characteristics of Capital

• Capital is the man-made factor of production.
• Supply of capital is elastic.
• Capital has mobility.
• All capital is wealth but wealth is not capital.

3. Definition of Labor

The physical or mental work which is done for the sake of reward is called labor.

Characteristics of Labor:

• Labor is the human factor of production.
• Labor is an active factor.
• Labor is cannot be stored.
• Two laborers cannot be identical.

4. Definition of Land

The land is a basic factor of production. It includes all-natural physical resources such as soil, sea, minerals, livestock, forests, etc.

Characteristics of Land

• Land is a gift of nature.
• Land has no cost of production.
• The supply of land is perfectly inelastic.
• Land is subject to the law of diminishing returns.
• Land is immobile.