Five Factors of Production
The Five Factors of Production
This paper will discuss the factors of production. Four factors, land, labor, capital, and entrepreneurship, are commonly recognized. However research has shown that a fifth factor, technology should be added and is becoming more important in today 's economy and almost overshadowing the previous four factors of production.
Land in production represents the natural materials used in production of goods and services. It provides the raw materials and resources that become the goods or the land that a building is constructed on to produce the goods. Labor is the physical and mental factor, whether it 's a design artist working on a magazine, or the accountant that manages the billing. The end result of Labor equals a product or service and provides wages for employees.
"Capital can refer to resources or investments that are either man- made or manufactured objects that help produce other products such as buildings and equipment to operate businesses." Capital can be roads, machines, factories, or office buildings, anything that help man create and produce other goods (2007). Another factor of production is "Enterprise which is when resources have people called entrepreneurs, who form the ideas for goods or services and plan and organize its production" (2007).
Technology should definitely be considered as a factor of production. In fact past studies have suggested that technology will grow significantly in the future. "Fueled by its constant technological and price improvements, information technology (IT) is displacing other inputs in the production of goods and services" (Dewan and Min, 1997). This study which was conducted a decade ago foreshadowed the important role that technology plays today. "IT capital is a net substitute for both ordinary capital and labor, suggesting that the factor share of IT in production will grow to more significant levels over time" (Dewan and Min, 1997).
Land, labor, capital, and entrepreneurship:
This paper will discuss the factors of production. Four factors, land, labor, capital, and entrepreneurship, are commonly recognized. However research has shown that a fifth factor, technology should be added and is becoming more important in today 's economy and almost overshadowing the previous four factors of production.
Land in production represents the natural materials used in production of goods and services. It provides the raw materials and resources that become the goods or the land that a building is constructed on to produce the goods. Labor is the physical and mental factor, whether it 's a design artist working on a magazine, or the accountant that manages the billing. The end result of Labor equals a product or service and provides wages for employees.
"Capital can refer to resources or investments that are either man- made or manufactured objects that help produce other products such as buildings and equipment to operate businesses." Capital can be roads, machines, factories, or office buildings, anything that help man create and produce other goods (2007). Another factor of production is "Enterprise which is when resources have people called entrepreneurs, who form the ideas for goods or services and plan and organize its production" (2007).
Technology should definitely be considered as a factor of production. In fact past studies have suggested that technology will grow significantly in the future. "Fueled by its constant technological and price improvements, information technology (IT) is displacing other inputs in the production of goods and services" (Dewan and Min, 1997). This study which was conducted a decade ago foreshadowed the important role that technology plays today. "IT capital is a net substitute for both ordinary capital and labor, suggesting that the factor share of IT in production will grow to more significant levels over time" (Dewan and Min, 1997).
Land, labor, capital, and entrepreneurship:
References: (2007). Factors of production. Retrieved November 13, 2007, from Wikipedia Web site: http://en.wikipedia.org/wiki/Factors_of_production Dewan, S. & Min, C. (1997). The Substitution of Information Technology for Other Factors of Production: A Firm Level Analysis. Management Science, 43 (12), 1660-1675.