Assignment: Please create a collage that depicts each of the four Factors. If you put your own entrepreneurship or labor profit will include that as well. When differentiated, the payment for this factor of production is called profit. If you own a plot of land and decide to build factory on it you are supplying that land to your firm where you are the household and as a result your compensation (profit you will get from operating the company) will include the rent from land as well as return on capital you supply that firm. ![]() This is really just obscured in modern world and hidden under all the legal arrangements but in the end there can be no company that is just owned by itself there must be some household behind it. There are two main types of factors of production: primary and secondary factors. Hence in the end it always must be some household providing that capital or land (by providing equity to the firms). household) that owns those companies.įrom economic perspective it does not really matter how long the paper chain between company and some household is, only thing that matters is that it exists. Below is a more detailed discussion to help you understand these factors and their role in the economy. ![]() these wonderful notes that you are reading required some combinaon of all four factors of producon to be made. There are four factors of productionland, labour, capital, and entrepreneurship. In the end after some chain of legal ownership there must be some physical person (i.e. There are four factors of production: land, labour, capital and entrepreneurship and understanding these factors, as well as the role they play in the economy, is of great importance. CAPITAL ENTERPRISE The Factors of Produc-on: are those resources that are used in the producon of goods and services In general terms, Factors of Producon are the stu used to make things. ![]() A building or a machine cannot own property. limited company for example) in the end any company has to be owned by household. All firms are in the end owned by some household.Įven if legally you can have both physical and legal persons (i.e. While it’s true that firms can pay other firms for land or capital (and in fact firms can pay another firms for entrepreneurship - you can hire consulting firms, and there are also firms that ‘borrow’ workers to other firms).
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