Notesale: Turn your study into money

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THEORY OF PRODUCTION
It deals with the question of how to produce? It discusses supply side of the
pricing of products
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Cost of production depends on, I
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ii
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The physical relationship forms the subject matter of theory of production
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Whether it is
the making of material goods or providing any service, it is included in the
production provided it satisfies the wants of some people
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Goods has to pass
through many stages and many hands until it reaches the consumer hands the
consumer’s hands in a finished form, Land, Labour, capital and entrepreneurial
ability are all the factors and resources which makes it possible to produce
goods and services
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Factors of production is being explained in the following paragraphs
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there are characteristics of
land
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Land is nature’s gift: land is free gift nature
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Supply of land is fixed: land is strictly limited in quantity
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3
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Even if its
fertility gets depleted, it can be restored
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It is a passive factor: land cannot be shifted from one place to another
place
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5
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Land varies in fertility and uses
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CHARACTERISTICS OF LABOUR
1
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it is
connected to human efforts, whereas others are directly connected with
human efforts
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Labour is perishable: Labour is highly perishable in the sense that a day’s
labour lost cannot be completely recovered the expenditure on
maintenance has to be there
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3
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Thus, a labourer
is the source of his own labour power
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Labour power differs from labourer to labourer: On the basis of labour
power, labour may be classified as unskilled labour, semi-skilled labour
and skilled labour
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5
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it
is because the labourer is economically weak while the employer is
economically powerful although things have change this day in favour of
labour
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Labour is mobile: Labour is mobile factor
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But in reality there
are many obstacles in the way of free movement of labour from job to job
or from place to place
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In other words, it means man
made instruments of production
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, are some of examples of capital
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TYPES OF CAPITAL:
Fixed Capital is that which exists in a durable shape and renders a series of
services over a period of time
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Circulating Capital is another form of capital which performs its functions in
production in a single use and is not available for further use
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Real Capital refers to physical goods such as building, plant, machines etc
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This is called human capital
because a good deal of investment has gone into creation of these abilities in
humans
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For
example, goodwill, patent rights, etc
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ENTREPRENEUR:
Having explained the three factors of production namely, land, labour and
capital we now turn to the explanation of the fourth important factor, namely
entrepreneur
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This factor is known as the entrepreneur

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