Factors of Production: Meaning and Importance Objective Type Questions (1 Mark)
Fairchild says, “Production consists of the creation of utility in ………..”
(c) Capital Formation
Economic utilities are created in goods and services mainly in three ways, which are:
(a) Form, time and value
(b) Form, value and place
(c) Value, place, time
(d) Form, time, place
(d) Form, time, place
That part of wealth which is used in production is called: (UP 2012, 18)
(d) None of these
………. is/are factor/factors of production: (UP 2013)
(d) All of these
(d) All of these
An individual has ………
(a) Limited Wants
(b) Infinite Wants
(c) Neither (a) or (b)
(d) None of these
(b) Infinite Wants
Factors of Production: Meaning and Importance Definite Answer Type Questions (1 Mark)
Write the factors which are used in production.
Land, Labour, capital, organization and enterprise.
Is Production possible without land? Give answer in Yes or No.
What are the different ways of creating utilities?
Form utilities, Time utilities and Place utilities.
Factors of Production: Meaning and Importance Very Short Answer Type Questions (2 Marks)
What is meant by the term production?
Production in common language means making, creating, growing and manufacturing. But in economics, the term production refers to the creation of utilities and not to the creation of matter.
Write the importance of organisation? (UP 2016)
Importance of Organisation. In the earlier stages of economic growth, the organisation as a separate and distinct factor did not exist. Production was a simple process. It was carried on in the home of workers who owned their workshops, had their own capital invested and managed the entire production process. But now when the conditions of production and marketing have become complicated, when factors of production lie scattered, the necessity of someone to bring all these factors together, and combine them in proper proportions has increased tremendously.
Explain any one factor of production.
OrganisationOrganisation: The work of bringing together land, labour and capital at one place, combining them in proper proportion and making them work together for the purpose of production is called the organisation. The man who does this work is called the organiser. The larger the scale of production, the greater is the need for organisation.
Factors of Production: Meaning and Importance Short Answer Type Questions (4 Marks)
Explain the importance of land and capital in production.
Importance of Land: No production is possible without land. It is, therefore, the most indispensable factor of production. Its importance lies in the following ways:
- The Economic Development of a country depends on land.
- Development of primary industries.
- Development of manufacturing industries.
- Development of means of transport and communication.
What is the importance of production?
Production is important both from the individual and social point of view. An individual has infinite wants. In order to satisfy these wants, he requires a large variety of goods and services for his consumption. These goods and services are produced by a number of people or by himself.
Production is important from the social point of view. If the volume of production is low in the country, the standard of living cannot be high. Production is the basis of the entire economy of the nation. It is on the basis of production that national income, economic development and industrial progress of a country depends. Thus from the social point of view production has great significance.
Factors of Production: Meaning and Importance Long Answer Type Questions (8 Marks)
What are the different kinds of Production? (UP 2009)
Kinds of Production: Production can be of the following kinds:
1. Production by an Addition of Form Utility: When the potter makes an earthenware or when a carpenter makes a table from wood, they create a form of utility in earth or wood.
2. Production by Creating Time Utility: Many things acquire more utility if they are kept aside for some time, for example, vinegar becomes more useful for favouring food and for pickles when kept aside for a long time.
3. Production by Creating Place Utility: When a commodity is taken away from a place where its demand is less to another place where the demand is greater, its utility increases. For example, the wood in the forest areas has less utility there but when it is brought down to someplace in city it acquires more utility. Thus, place utility is created in the wood brought down to a city for making furniture etc.
4. Production by Change of Ownership: When the right of ownership is transferred from one person to another, its utility increases for the second person. For example, a book is not so useful to a bookseller who owns the bookstall but when the ownership to the book is transferred to a student, it acquires more utility to him.
5. Production by Increasing Knowledge about a Commodity: Newspaper, films, radio and television increase our knowledge of the usefulness of a commodity. By advertisement, they create utility in it and thus are performing production.
6. Production by Personal Service: Teachers, lawyers, doctors, musicians performs services to society. They create service utility. Thus, the creation of service utilities is also production.
Explain the various factors of production. (UP 2015)
What is meant by Production in Economics? Describe the various factors of production. (UP 2011, 12)
What do you understand by land? (UP 2012)
Meaning of Production. Production in common language means making, creating, growing and manufacturing. For example, a conjurer produces a rabbit from his hat; farmers produce good crops; factories produce woollen goods. But in Economics, the term production refers to the creation of utilities and not to the creation of matter. For example, when a potter produces earthenwares, he creates utility in the damp earth.
Dr Richard Ely says that production means, “creation of economic utility”
Fairchild says, “production consists of the creation of utility in wealth.”
Let us take more examples and see what these economists mean by the term production in Economics. A mason puts brick and mortar and gets a house built. He simply re-arranges and combines articles of matter and gives them a form of house which has greater utility for a man than before. Thus, more utility has been created.
A carpenter makes a chair. He changes the form of wood that really exists before. Wood is already there; he makes it more useful for man, i.e., he creates utility in wood.
A tailor does not create a bush-shirt; he simply creates a utility with the help of his needle and thread. Thus, production means the creation of utilities and not matter.
Definition of Production: Let us analyse the definition of production given by Dr Fairchild. He says, “The addition of economic utilities of commodities alone is production.” By the term economic utilities, he means exchange value. Production does not mean the creation of utilities, but on the contrary, it means the creation of economic utilities. Economic utilities are created in goods and services mainly in three ways:
- Form utilities
- Time utilities
- Place utilities.
Thus, the term production in Economics means the creation of goods and services that have exchange value.
In recent years, a new definition of the term ‘Production’ has come up. Prof. J. R. Hicks defines production as, “any activity whether physical or mental which is directed to the satisfaction of other people’s wants through exchange.”
Various Factors of Production. Land, Labour, Capital, Organisation and Enterprise are the five factors which makes the production possible. The explanation of each factor is as follows:
1. Land: In economics, land means all the natural resources available not only on land but also in water and air which are given to human beings as free gifts of nature. Thus, by land we do not mean merely soil but it stands for all the free gifts of nature like mountains, hills valleys, rivers, plains, trees, wind, light, etc. The land which forms the original or basic source of all material wealth, thus, is the most important factor of production.
2. Labour: Any type of work undertaken by mind or body with a view to earning an income can be termed as labour. Thus, under the term ‘labour’, we can include not only the labour of unskilled workers but also all those categories of work both mental and physical which are exerted to earn an income.
3. Capital: Capital plays a vital role in the modern productive system. Capital signifies all those physical goods which are used purposely for further production by human beings. But in the ordinary sense of the term, capital is used for money. Whereas in economics, capital stands not only for money but also for tools, instruments, machines, factories, raw materials, transport, equipment etc.
Capital and wealth are two different things. Capital is that part of wealth which is used for further production of wealth. Thus, all wealth is not capital, but all capital is wealth.
4. Organization: A village artisan can perform his work without much organizing skill. This is because his work is quite simple and is done on a small scale. But organization is of supreme importance in the large scale production of modern times where the division of labour and the use of machines are applied extensively. Land, labour and capital need to be brought up together and put into production effectively. This requires skill and efficiency. A person who has got the skill and organising capacity can make these factors to co-operate effectively in the most harmonious way.
5. Enterprise: Small scale production, small capital and small output do not involve a greater degree of risk. Industrialisation, large scale production, division of labour have changed the quantum of risk in modern times. The risk element borne by concerns which were quite meagre in the yesteryears has turned out to be greater nowadays. The task of bearing uncertainty or risk is now borne by the enterprise, and production on a large scale which involves considerable risk and makes it another factor of production.