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Labour mobility can be broken down into two categories: Among all the factors of production, Labour is largely pronounced with mobility not denying that other factors of production can become mobile.įactor mobility can be seen when land used for growing vegetables can be used for building a complex for departmental stores, Capital equipment that are used to produce shoes can also be used to produce bags, Enterprise can also delve into production of other commodities, Dangote that produces cement is also involved in the production of Pasta. The mobility of factors of production refers to the extent to which resources can be changed for one another in the production process. The reward for Land is rent and it is immobile. The quality of land can be degraded through erosion or loss of soil quality due to intensive farming techniques.

The supply of land is relatively fixed but the quantity of resources on/in it can change considerably due to human activities such as mining, fishing, forestry etc. This refers to all-natural resources which could be used for farming or building, it also includes the resources under the land (oil, minerals metals etc), the resources on the land (mountains, forests, lakes etc) the fish stock in the sea. Holiday entitlement (again varies between countries).The supply of labour is determined by the number of workers available and the duration that they can work for.įactors that affect the supply of labour are: The reward for Labour is Wages/ Salaries. Labour is the human effort done mentally or physically with the aim of earning wages or salaries. The reward for taking the risk and getting it right is profit, however the risk is losing money and being forced out of business. Some risks can be insured against (fire, theft etc), but others such as increases in costs of raw materials or increased competition cannot. An entrepreneur has to organise the factors of production, decide what to produce and how much to produce. This is the decision making and risk bearing in business by an entrepreneur. Working capital: this is used up in the process of production (raw materials, seeds etc).įixed capital: longer lasting and not used up in the production process (machinery, warehouses etc). There are two main classifications of capital: The 4 Factors of Production are acronym-ed CELL Capital, Enterprise, Labour, LandĬapital is anything that is used to produce other goods and services rather than being used for its own sake (machinery, tools, offices etc). Resources lying idle are wealth but not capital.

But capital is the part of this wealth that is currently in productive use. Wealth is the sum of all money, goods, human values, etc that can be useful in the production of further wealth. Factors of production is an economic term that describes the inputs used in the production of goods or services in order to make an economic profit. We can define capital as the productive part of a firm’s wealth.