- To produce output, any enterprise requires inputs.
- These inputs are broadly divided into four categories.
- They are called the four “factors of production” or “inputs of production”.
Entrepreneur
- The person who takes the risk to start a new business.
- Brings together capital, labor, and natural resources.
- Expects “Profit” in return.
- The entrepreneur is a human being from the household sector.
Capital
- Includes physical assets like buildings, machinery, equipment.
- From an economic view, only physical capital goods are considered.
- The return for capital is called “Interest”.
Natural Resources
- Includes land and raw materials.
- These are naturally available and not man-made.
- The return for natural resources is called “Rent”.
Labour
- Refers to human labor, which can be physical or mental.
- It can be unskilled, semi-skilled, or skilled.
- When labor is provided, the return is “wages”.
- The laborer is a human being from the household sector.
