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Back to: ECONOMICS SS1 Welcome to class! In today’s class, we will be talking about labour as a factor of production. Enjoy the class! At the end of the lesson, you should be able to;
NOTE LabourIt may be defined as all forms of human efforts both mental and physical efforts put towards the production of goods and services. It is one of the variables factors of production cannot take place without the utilization of labour. The reward of labour is in the form of wages and salaries. Characteristics
Types of labourThere are three common types of labour:
Importance of labour
Evaluation
Efficiency of labourThe efficiency of labour means the ability of a worker to increase his output per hour without any loss in the quantity and quality of the goods produced. That is, it is the measure of the level of productivity of labour in terms of his optimum use of resources to produce goods within a given period without any loss in the quantity and quality of goods produced. The major aim of all employers of labour is to get the maximum output from their workers and to get this, efforts are therefore made to keep them happy. This is what is being done by various employers of labour both in the public and private enterprises to increase the efficiency of their employees. Factors affecting the efficiency of labour
Evaluation
Reading assignment Amplified and simplified Economics for SSS by Femi Longe Chapter 4 Pages 45- 49 Fundamentals of economics by R.A.I Anyanwuocha Chapter 4 Pages 25 – 26 Chapter 12 Pages 102 – 105 General evaluation
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An economic concept that refers to the inputs needed to produce goods and services Factors of production is an economic concept that refers to the inputs needed to produce goods and services. The factors are land, labor, capital, and entrepreneurship. The four factors consist of resources required to create a good or service, which is measured by a country’s gross domestic product (GDP). In factors of production, the word “production” refers to a process of transforming inputs into outputs, which are finished products that can be sold as a good or service. In order to do so, the input will go through a production process and various stages to reach the hands of consumers. Land as a Factor of ProductionLand is a broad term that includes all the natural resources that can be found on land, such as oil, gold, wood, water, and vegetation. Natural resources can be divided into renewable and non-renewable resources.
All resources, whether it is renewable or non-renewable, can be used as inputs in production in order to produce a good or service. The income that comes from using land and its natural resources is referred to as rent. Besides using its natural resources, land can also be utilized for various purposes, such as agriculture, residential housing, or commercial buildings. However, land differs from the other factors of production because some natural resources are limited in quantity, so its supply cannot be increased with demand. Labor as a Factor of ProductionLabor as a factor of production refers to the effort that individuals exert when they produce a good or service. For example, an artist producing a painting or an author writing a book. Labor itself includes all types of labor performed for an economic reward, such as mental and physical exertion. The value of labor also depends on human capital, which is determined by the individual’s skills, training, education, and productivity. Productivity is measured by the amount of output someone can produce in each hour of work. The income that comes from labor is referred to as wages. Note that work performed by an individual purely for his/her personal interest is not considered to be labor in an economic context. The following are several characteristics of labor in terms of being a factor of production:
Capital as a Factor of ProductionCapital, or capital goods, as a factor of production, refers to the money that is used to purchase items that are used to produce goods and services. For example, a company that purchases a factory to produce goods or a truck that is purchased to do construction are considered to be capital goods. Other examples of capital goods include computers, machines, properties, equipment, and commercial buildings. They are all considered to be capital goods because they are used in a production process and contribute to the productivity of work. The income that comes from capital is referred to as interest. Below are several defining characteristics of capital as a factor of production:
Entrepreneurship as a Factor of ProductionEntrepreneurship as a factor of production is a combination of the other three factors. Entrepreneurs use land, labor, and capital in order to produce a good or service for consumers. Entrepreneurship is involved with establishing innovative ideas and putting that into action by planning and organizing production. Entrepreneurs are important because they are the ones taking the risk of the business and identifying potential opportunities. The income that entrepreneurs earn is called profit. More ResourcesIf you would like to gain valuable skills that can help develop your journey in corporate finance, CFI is the official provider of the Financial Modeling & Valuation Analyst (FMVA)® certification program. CFI also offers a variety of courses and related readings for you to continue learning, including: |