Question

What are the factors of production and which of these factors is generally accepted as the most important factor and why? Explain.

Answer 1

There are basically four factors of production. This include labor land capital and entrepreneurship. Most of the production process used land as a fixed resource. Labour and capital are mostly variable however in some cases, where large machinery and plant are used, capital is also assume to be fixed. Labor is considered the only variable factor that can be changed to change the level of production.

The most important factor is the entrepreneurship because it is the entrepreneur who organises all the other factors of production. In most of the economic theories of production, the profit is the income of the entrepreneur in return for its labor services being used in the production process.