Factors of production in the economy: definition and classification

Any business entity can be represented in the form of a production system, where the transformation of various factors of production into finished products takes place.


Factors of production in the economy are the main components used in the production process of manufacturing products, works or services. The main of which will be discussed in more detail below.

Components of production factors

production factors in the economyLabor is a certain contribution of a person to production in the form of spending physical and mental efforts.

And the land is represented by resources used in agriculture, the construction of roads and houses. It is on this resource that enterprises, cities and villages are located.

Capital as a means of labor, known as the "investment resource", consists of money invested in production facilities (buildings and structures, production equipment, materials and raw materials).

Entrepreneurial activity is characterized by the properties of a person and their real manifestation, consisting in skills, mobility, professionalism, initiative and enterprise.

Entrepreneurial skills are represented by people's skills to combine all the above factors of production, which contributes to the creation of goods or services with high efficiency, as well as to make the right decisions regarding the implementation of the production process.

The structure of the enterprise and the factors affecting it

From the point of view of a systems approach, an enterprise is a combination of the structure of a business entity as a system and various ways of its elements work.

harmful and dangerous factors of productionThe structure is expressed by a certain interaction of individual elements, which ensures the functioning and further development of the enterprise itself. Any organization is in direct correlation with the term "management".

There are the following structures of enterprises: production and organizational.

The first kind of structure uses the following factors of production in the economy:

- nomenclature of finished products;

- scale of production;

- the degree of cooperation.

The organizational structure of an enterprise is represented by the size and composition of individual units (for example, a workplace or department), their interaction, the form of construction and distribution of certain areas of activity.

Technology is a way of converting key production factors into a finished product. This is a set of operations aimed at changing the size, objects of labor, properties, methods of their processing and production in the direct production process.

Karl Marx classification of factors

There are such approaches to the classification of factors into separate groups.

factors of demand for factors of productionThe factors of production in economics, according to Marxist theory, are the following: labor, object and means of labor. All of these factors were combined into two groups: own factor and real factor.

Under its own (personal) factor should be understood as labor as a set of intellectual and physical abilities of a person. The material factor is the totality of all means of production.

Factors of production in the economy form a complex systeminteractions. Its effectiveness can be determined by the organization and technology of the production process itself.

Marginal classification of production factors

In accordance with the interpretation of the marginalist theory, four classes of factors are distinguished: capital, labor, land, and entrepreneurship. At the same time the earth is a natural factor. This group includes natural resources and minerals used in the production process.

Capital is a special factor in production

production factors in the economyCapital economists compare with the means of production. So, A. Smith capital was presented in the form of accumulated and materialized labor, D. Ricadro believed that capital is the means of production. However, capital can be defined as the knowledge and skills of a person with his energy used in the manufacture of goods and services.

There are features of the demand for factors of production represented by capital, since it can be represented simply by the time that creates additional income.

Thus, it is safe to say that capital is a rather complex concept, which, based on external signs, can appear in such means of production as money, people, and goods.However, the material carriers, which have already been mentioned above, are not just capital, but form special relations in production.

Capital is not a simple thing. This, above all, social relations, presented in the form of a certain thing, which gives it (things) a specific character.

The views of prominent economists on such a concept as capital are diverse. However, they are unanimous in the fact that it is capital that quickly generates income.

Capital classification

There is the following classification of capital: working capital and principal. The difference between these two types is the nature of transferring the value of the real production factors to the finished product.

harmful and dangerous factors of productionSo, under the main capital it is necessary to understand buildings, structures, equipment. In other words, all movable and immovable property that has been directly involved in production for several years and transfers part of its value in the form of depreciation deductions to the finished product. Among the listed components of fixed capital are harmful and dangerous factors of production. The depreciation of such capital is represented by the gradual loss of its own consumer properties.It is also known that moral depreciation is also a component of depreciation deductions and is represented by a decrease in the cost of the means of production used, based on the degree of loss of consumer properties.

However, there is another component of capital represented by raw materials, materials, energy resources. This list of elements is consumed in one production cycle and reincarnated into finished products. It is this part of the factors of production that constitutes working capital. At the same time, the money spent on the formation of working capital is returned to the business entity after the sale of finished products.

Features of labor as a factor of production

factors of demand for factors of productionLabor is an intellectual or physical activity aimed at producing goods and providing services. The combination of such abilities of any person, which is due to the appropriate education, skills and vocational training, forms human capital. Moreover, qualifications and capital are in direct proportion.From their interaction depends on the income of this type of capital (wages).

The human factor contributes to increased production efficiency.

Today, any investment in human beings is the most effective and fast-paying factor of production. The time period during which a person must work is called a working day, the duration of which has specific boundaries.

Related news

Factors of production in the economy: definition and classification image, picture, imagery

Factors of production in the economy: definition and classification 16

Factors of production in the economy: definition and classification 53

Factors of production in the economy: definition and classification 88

Factors of production in the economy: definition and classification 21

Factors of production in the economy: definition and classification 15

Factors of production in the economy: definition and classification 8

Factors of production in the economy: definition and classification 85

Factors of production in the economy: definition and classification 89

Factors of production in the economy: definition and classification 73

Factors of production in the economy: definition and classification 53