Factor Of Production
All four factors of production categories are important to the production of goods used in the wants-and-needs-satisfying process that keeps human beings alive from one day to the next and makes living just a little more enjoyable. Land provides the basic raw materials that become the goods. Labor does the hands-on work. Capital is the tools that makes the job easier. And entrepreneurship organizes the entire process.
Capital
Capital has two economic definitions as a factor of production. Capital can represent the monetary resources companies use to purchase natural resources, land and other capital goods. Monetary resources flow through a nation’s economy as individuals buy and sell resources to individuals and businesses.
Capital also represents the major physical assets individuals and companies use when producing goods or services. These assets include buildings, production facilities, equipment, vehicles and other similar items. Individuals may create their own capital production resources, purchase them from another individual or business or lease them for a specific amount of time from individuals or other businesses.
Characteristics of capital:
1) Capital is man made factor of production.
2) It involves time element.
3) Capital may be fixed: i.e. it is durable use pre use producer goods e.g. machinery, well in agriculture.
It may be working: i.e. it is single use producer’s goods e.g. seed, fertilizer in agriculture.
Function of capital:
1) Supply of raw material: The working capital required in production process represents raw material.
2) Supply of appliances and equipment: The fixed capital goods.
3) Provision of subsistence: If capital is available to the poor person, he can utilize it and run his family very well. Supposes only 5 to 6 goats maintain by a poor person it will give him sizeable income to survive his family.
4) It also employment means of transport:
5) Supply of employment: If ample supply of capital is made, it will enhance production which will in turn give employment.
Importance of capital:
In modern economy capital is very important factor of production which is essential to undertake production.
Without capital other factors of production (like land, labour) will become handicap.
On the contrary, if apple supply-capital is made the production and productivity can be increased substantially.
The economic development of any country does not solely depend upon the available land and labour but how much capital is made available is also equally important.
The under-developed countries remained, under-developed due to lack of capital.
The ample supply of capital gives boost to production.
When more production is there, more economic activities can he initiated and as a result, more employment opportunities can be created.
More employment further helpful for minimizing the poverty or improving standard of living of the people.
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