Identify how the four factors of production (land, labour,capital and enterprise) have gone into making a 2 litre full cream milk?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Let us look at each of the factors of production in turn with regard to how each of them would go into making full cream milk (I believe this is what we Americans would call “whole milk”).

First, “land” is the term used to refer to anything that is a natural resource.  This is something that comes from the earth and has not been “improved” by human beings.  In making the milk, land would have been needed at a variety of points in the process.  The cows would have had to live in some physical place.  Even if they lived in a building, that building would be on land.  If the cows grazed on natural pastures (as opposed to eating things like hay), the grass on which they grazed would be “land.”  The milk would have been stored in tanks, which also have to be placed on a specific physical place.  That place is “land.”

Second, there is labor.  This is all the work that is done by human beings.  If human beings have to round the cows up and bring them into a building to be milked, that is labor.  If human beings have to attach milking machines to the cows, that is labor.  If human beings have to operate the machines that fill the 2 liter jugs, that is labor.

Third, there is capital.  Capital is a term that is used to refer to anything that people have made that will be used to make other things.  In this case, the building in which the cows live, or in which they are milked would be capital.  The machines that milk the cows and the machines that put the milk in jugs are capital.  All of these things were made by human beings and are being used to produce the milk.

Finally, there is “enterprise” or, as we call it in the US, “entrepreneurship.”  This is the intellectual work that is done by a person who figures out how to deploy other resources in a way that will make profit.  In the case of the milk, this would include the idea that was conceived by the person who first formed the company and who gathered the money and the other resources needed to make the milk.  Had it not been for this person’s effort, the land, the labor, and the capital would not have been brought together to make this milk.

In these ways, all four factors of production go into making 2 liters of milk.

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