Production means a creation of value in the goods. Production consists in creating utility in goods for the satisfaction of human wants.
- Production activity helps in transforming a set of inputs into goods and services. It essentially means a transforming of one set of goods into another. The output which comes out of production has greater utility over the inputs combined in the production process. The inputs that are used in production of goods may be provided by the nature and/or by other industries. According to Adam Smith the production of a thing is complete only when it is in the hands of the consumers. According to Dr. F.G. Fairchild production consists of the creation of utility in wealth.
- The factors of production means the production resources required to produce a given product.
- Fraser defined factors of production as “a group or class of original productive resources”.
- The factors of production have been traditionally classified as Land, Labour, Capital and Organization.
- In the theory of production; it is assumed that the entrepreneur aims at maximizing his profits. A profit- maximizing entrepreneur will seek to minimize his cost for producing a given output, or to put it in another way; he will maximize his output for a given level of outlay.
Land:
- Land, as ordinarily understood, refers to earth’s surface. But in economics, the term land is used in a very wider sense. It does not mean surface soil only but includes all those which are the free gifts of nature.
- Marshall defined land as “the materials and forces which nature gives freely for man’s aid in land and water, in air and light and heat”.
- Land refers to those natural resources that are useful and scarce. In other words, land stands for all natural resources, which yield an income or have an exchange value.
- In land we include all those natural forces which are above or over the earth like air, light, rainfall, sunshine, etc; which are on the earth like rivers, forests, lakes, vegetables, etc; and which are beneath the earth like coal, iron, copper, oil, minerals, etc.
Characteristics Features of Land:
Land as a factor of production has the following characteristic features:
- Land is a free gift of nature. Labour efforts, howsoever great, cannot create even an inch of land. It is given to us free of charge by nature.
- Land is limited in supply. We cannot increase the supply of it. If our needs for it neither increase, nor can we decrease the supply of it, if our needs for it decrease.
- All the lands are equally well or ill situated. Some lands are situated near the market and other away from it.
- Land is immobile i.e. it cannot be transported from one place to another. Products of land are mobile (wheat, cotton, jute, etc. can be transported from one place to another), but land itself is immobile.
- Land has original and indestructible qualities. These cannot b destroyed because these are given by nature. It is, no doubt, true the man tries to improve upon its qualities- according to his abilities but the basic qualities cannot be changed or destroyed.
- Land is a passive factor of production because it cannot produce anything by itself. Man has to invest money and apply labour to produce something out of it.
- The price of land depends upon its situation. Lands which are near the water (rivers and canals) or neat cities command higher prices than lands situated away from water or cities.
Land and its productivity:
Productivity of land means the capacity of the land to produce. It is also called the efficiency of land, which depends on the following factors
- Relief
- Climate
- Rainfall
- Situation
- External factors
- Soil structure
- Irrigation
- Capital
- Organization
- Proper use
- State patronage
- Before studying the different theories of factor of production, let us discuss the characteristics of different factors
|
Participants