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Managerial Economics - Production Analysis

Factors of production - Production Analysis

   Posted On :  29.05.2018 12:04 am

Production is an important economic activity which satisfies the wants and needs of the people.

Factors of production 

Production is an important economic activity which satisfies the wants and needs of the people. Production function brings out the relationship between inputs used and the resulting output. A firm is an entity that combines and processes resources in order to produce output that will satisfy the consumer’s needs. The firm has to decide as to how much to produce and how much input factors (labour and capital) to employ to produce efficiently. This chapter helps to understand the set of conditions for efficient production of an organization.
 
Factors of production include resource inputs used to produce goods and services. Economist categorise input factors into four major categories such as land, labour, capital and organization.
 
Land: Land is heterogeneous in nature. The supply of land is fixed and it is a permanent factor of production but it is productive only with the application of capital and labour.
 
Labour: The supply of labour is inelastic in nature but it differs in productivity and efficiency and it can be improved.
 
Capital: is a man made factor and is mobile but the supply is elastic.
 
Organization: the organization plans, , supervises, organizes and controls the business activity and also takes risks.
 
 

 

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