Basic Economics: Concept of Production!

Production in the general sense means to create something. But in economics the word ‘production’ is used in a special sense. In economics, production means the utilization of a commodity. Because, man cannot actually create anything. Everything that surrounding us is a gift of nature. Humans can create new uses by changing the shape, form or size of all these products given by nature. So, production means to create utility. Such forest wood is a gift of nature. Chairs or tables are made by extracting trees or wood from the forest and giving it a specific shape and form. In other words, making a chair means creating a wooden utility. So, production in the economy does not mean the creation of a commodity; Rather it means to create more utility by changing the shape, form or place of the product.

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Factors of Production

All the goods and services required to produce something are called Factors of Production. These factors of production are mainly divided into 4 categories. These are:

  1. Land
  2. Labor
  3. Capital and
  4. Organization.

1. Land: The surface of the earth is usually called land. In economics, land refers not only to the surface of the earth, but also to all the resources given by nature. Soil fertility, weather, rainfall, heat, water, wind, sunlight, mineral resources, forests, fisheries, mountains, rivers, rivers, etc., all-natural resources belong to the land. In short, all the natural resources used in production are called land in the economy. Land is a basic element of production.

2. Labor: The second element of production is labor. In the general sense, labor means only physical labor. But in economics it is used in a broad sense. All the work effort of the people engaged in production is called labor. This labor can be both physical and mental. Labor includes all the physical and mental efforts of different classes of people like farmers, workers, teachers, lawyers etc. It is not possible to produce any product without labor. For this reason, like land, labor is also considered as the basic element of production.


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3. Capital: Capital usually means money invested in business; But the word capital is not used in that sense in economics. The part of the product that is used in production is called capital. Machinery, raw materials, mills, etc. Man-made goods which are used in production are called capital. In short, all the goods produced by human labor which are not used for current consumption but are used for reproduction are called ‘Capital’.

4. Organization: The last important element of production is organization. The organization is the management of production by combining different elements of production such as land, labor and capital. It is the process of coordinating the various components of a business to achieve a specific one or more objectives is called organization.

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