Reading. Read the text and find out what factors of production are

Read the text and find out what factors of production are.

Economists have long recognized the three major factors that people use to create the things they want. Land, labor, and capital are "factors of production”, or “inputs”. Each factor plays an important role in the production of goods, and each factor is clearly distinguishable from the other two.

Land includes not only the site of production but natural resources above or below the soil. These are agricultural land, mineral deposits, forest, rivers, lakes, oil deposits, mountains, etc. Land is a passive factor in production. To make the gifts of nature satisfy our needs and desires, human beings must do something with natural resources. This activity is called labour.

Thus, labour is human effort – physical and mental – which is directed to the production of goods and services. But labour is not only a factor of production, it is also the reason why economic activity takes place. The people who take part in production are also consumers, the sum of whose individual demands provides a business person with the incentive to undertake action.

Capital is a man-made resource. Any product of labour and land which is reserved for use in the further production is capital.

Capital was created when people began to make simple tools to assist them in the production of food, the hunting of animals, and in the transportation of their possessions.

Entrepreneurship is also sometimes considered a factor of production. Land, labour, and capital will not produce anything. There must be some person or persons who will organize these three factors so that production takes place. Someone must take the decisions what, how, and where to produce. Whoever takes the decisions and the risks is known as an entrepreneur.

Organisation, management and risk-bearing – these are the entrepreneurial functions. In a one-person business, they are all carried out by the sole-proprietor. In a large company, the functions are shared.

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