(a) What is production? (b) Explain the following factors of production: (i) land (ii) labour (iii) capital (c) State three functions of an entrepreneur.

Answer Details

(a) What is production?

Production is the creation of goods and services to satisfy human wants. It covers all the activities involved in making goods and services available to consumers, from the extraction of raw materials to the final delivery of finished goods and services.

(b) Factors of production

1. Land: This refers to all the free gifts of nature used in production, such as the soil, forests, rivers, minerals and other natural resources. Its reward is rent.
2. Labour: This is the human effort, both physical and mental, applied in the production of goods and services. Its reward is wages or salary.
3. Capital: This refers to all man-made assets used to produce further goods and services, such as machines, tools, buildings and money set aside for business. Its reward is interest.

(c) Three functions of an entrepreneur

1. He organizes and combines the other factors of production (land, labour and capital) to produce goods and services.
2. He bears the risks and uncertainties of the business, since profit is not guaranteed.
3. He takes the major decisions of the business, such as what to produce, how, where and for whom to produce.