Production factors (economics)

Also known as: Input factors

In order to satisfy needs, the production of goods is necessary, which is done by combining the production factors in production facilities. The question is: what are production factors? The forces involved in any production can be traced back to their original elements.

Dabei ergeben sich mit Arbeit (Human capital), Boden (Naturkapital) und Kapital (Physical capital) drei Faktoren, auf die jede Produktion beruht. Diese Faktoren nennt die Volkswirtschaft: Produktionsfaktoren.

Production factors (economics)

Subdivision of the factors of production

The national economy divides production factors into two original or original production factors and a derived or derivative production factor. Labor and land are the original production factors, while capital (physical capital) is the derivative production factor.

Example - Original and Derivative Production Factors

A man catches fish with his hands to support his family. This means that it combines the original production factors of land or nature and labor in order to produce consumer goods for the satisfaction of needs.

The man has the idea of improving the supply of fish. He weaves a fish trap out of willow rods and attaches it to a suitable place in the stream so that fish can catch themselves in the net. In the production of the fish trap, he combines soil or nature (willow rods) and work.

In this case not for the production of consumer goods, but for the production of a production good. With the help of the production good, he can more easily procure consumer goods (fish).

Labor as a factor of production

The production factor labor is man's personal contribution to the production of goods. This is any kind of physical and mental activity aimed at generating income.

For the national economy it is important how high the quality of the production factor labor is. The level of education of the available workforce is important. The work potential depends on the number of possible workers. In addition, the employment rate provides information on how high the share of the employed in the total resident population is.

Soil as a production factor

The nature used for economic purposes is the production factor soil. In addition to the ground surface, this includes sunlight, air, water, forests and other natural resources and natural forces.

Soil is an extremely scarce commodity, while other economic goods are scarce because they can be multiplied within certain limits.

Capital as a derived factor of production

Capital arises from the interaction of the two original production factors, labor and land, which is why it is called a derived production factor.

Requirements for capital formation

Saving (renouncing consumption) or investing what has been saved are the prerequisites for capital formation. People save by using part of their income for consumption and investing the rest to build capital. Another way of saving is for companies to invest part of their profits instead of distributing them.

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