The four Factors of Production are Land, Labor, Capital, and Entrepreneurship, and these are the things that create all of the goods and services that make up an economy. The Factors are unique in themselves, but often also work together in the production of what gets dispensed into society. Listed below are each of the Factors of Production explaining exactly what it is comprised of and also how it is distinctly important to the systems of production.
Land
The first Factor of Production is Land. Land includes anything that is considered a natural resource, but also the physical space within a location as well. The definition for Land can be extensive and includes the different forms of what comes from the land.
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Some of the resources that Land is responsible for providing include things like oil, coal, timber, or gold. These substances are mined and then turned into marketable products like gas, electricity, lumber, or jewelry, respectively.
Additionally, Land is also considered a resource within the real estate market, both residentially and commercially.
Labor
The second Factor of Production is Labor which encompasses the physical exertion of human individuals to produce the goods and services sold. There are many facets to what comprises a person's Labor value, which is specific to the product being produced.
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When thinking about Labor as a Factor of Production, the individual's skill level, education, and interest in productivity are incredibly important elements. Almost everything we interact with as a society is determined by the Labor of another person. Some examples of this are the individual who assembled the laptop you are using, a bartender mixing drinks, the city bus driver, a journalist writing a newspaper column, or the salesclerk who checks out your groceries. Any person who is being paid a wage to do a job is contributing to the Labor Factor of Production.
Specific industries, like Wall Street, technology, or hospitality, are highly dependent on the human Labor factor.
Capital
Capital is the third Factor of Production. It is important to remember that this is not referring to money, as the word capital sometimes does in discussions of economics. Rather, what Capital as a Factor of Production means are the created items that are used to produce the goods or services put out.
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One way to think about Capital, is that it is the machines and equipment that complement humans in exerting their Labor in order to produce a marketable good or service. Some examples of Capital are a typewriter that enables an author to produce a novel, an industrial coffeemaker that allows a local coffee shop to make drinks, or the zamboni machine that cleans the ice during a professional hockey game. It is important to recognize that Capitol as a Factor of Production does not include machines that are purchased for individual and personal use. A vacuum purchased for your home is a consumer good and not an example of Capital, but a vacuum purchased to use in your clothing store is Capital as a Factor of Production.
Entrepreneurship
The final Factor of Production is Entrepreneurship which details an individual's ideas, concepts, and emotional effort to produce a product or service to introduce in the economy.
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The individual who is utilizing Entrepreneurship as a Factor of Production has combined the first three Factors, along with an original idea or pioneering spirit to create a profit. Some real-world examples of this Factor is Jeff Bezos' initiation and development of the company ''Amazon'' or the way that Howard Stern transformed his radio show into a national cultural experience.
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