Elaborate on factors of production (C-E-L-L).Why are these considered factors of production?

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pohnpei397 eNotes educator| Certified Educator

Factors of production are the things that human beings need if they are to make goods or services to provide to other people.  In other words, these are the inputs that go into various products.  With this definition in mind, we can see why each of the “CELL” factors should be seen as a factor of production. 

The first factor of production is land, which is defined as anything not made by man that is used in production.  Every economic activity requires “land” to a greater or lesser degree.  At the very least, a person needs a physical spot on which to do business.  If you are producing a good rather than a service, you need the materials to make into that good.  Those materials had to, at some point, have been “land.”

The second factor is labor.  This is clearly needed for any economic activity.  No good or service simply produces itself.  Even if you are making your living from animals that range freely, you still have to at least round them up once in a while and shear them or slaughter them.  Therefore, labor is always necessary.

The third factor is capital.  This is needed for almost any activity.  Capital is defined as the man-made objects needed for economic activity.  A subsistence farmer needs, at the very least, a digging stick to make holes in the ground to plant crops.  Any kind of “modern” subsistence farmer at least needs some sort of plow.

Finally, there is entrepreneurship.  Not all economists see this as a factor of production because it is not always necessary.  However, it is necessary in order for new economic activity to exist.  Someone must take the risk and innovate in order for any new company or new product to arise.