Factors of Production

After discussing the types of economic systems in which production is organized. What are the factors of production ? Now let's see how the actual goods and services produced. Essence is clear [employment]. Nature may provide the raw material, even some of the final product, but labor is still needed to make it usable, although it was just a pick fruit from trees.

Nevertheless the human labor alone will not be of much use unless there is something that can be worn to work. All the production requires the use of land with a certain area such as for example in the case of dairy farms in need of a vast land, but for office buildings or factories is relatively small.

More importantly, require the production of building equipment, machinery, equipment. These objects are collectively called the capital of economics is defined as "goods that are not consumed, but used to produce other goods". If you doubt the importance of capital, let alone consider the case of people who dig the trench. If only using his bare hands, how much can be dug in one hour? Five feet as possible. Now give him a rudimentary capital goods such as hoes. Now how much? Ten times more? Most likely, yes. Give him a step further excavating the soil-powered machine, maybe you could multiply the result by the number back ten or even more. The increase is very great.

Of all the factors that have led to a yield increase during these centuries, the economist to assess developments in the capital as the most important. So it's no use if we review it more thoroughly. We have defined it as "goods used to produce other goods and services", therefore, capital is distinguished from the consumption of goods and services that serve to give satisfaction to the end consumer. Capital notion here is somewhat different from the use of the word "capital" by the layman as a sum of money that can be used to purchase capital goods. Said the investment (capital investment) in economics is defined as "the production of new capital goods' re different from the meaning of the popularity of buying stocks and shares which is only a claim to ownership of capital goods used by business firms.

Capital goods are often divided into fixed capital (buildings, machinery) and for working capital or turning (mental materials used in production: sometimes used to refer to money). The term capital is used for the inventory of finished goods inventory waiting to be sold. Current capital is money available for capital goods. Another term that is sometimes encountered is the social capital (usually provided by the state to build highways, hospitals, ports and schools). And human capital. But this is a little too beautiful descriptions of the labor of a country should recognize the fact that many people use depends on the education and training provided to him.

If we have to equip themselves with capital goods, it is clear we must refrain from consuming everything we produce because if so then there will be no piece was left. In other words we have to save. Capital requires saving. This is not a major problem developed countries. Actually, sometimes problems arise because we are saving too much. This means that too little is used so that the consequences of unemployment arises. But for developing countries could be saving the real problem because people need to consume almost all the products in order to survive. As discussed in the growth and economic development.

So this post may your day enjoyable.