Factors of Production
Factors of production are the resources used to make goods and services: land, labour, capital and enterprise.
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Factors of production are the resources used to make goods and services: land, labour, capital and enterprise.
- Land includes natural resources
- Labour is human effort
- Capital means machinery and tools
🧠 Quick quiz
Three questions. Score 2 or more to complete the topic.
What is Factors of Production?
Within Economics & Civics, which covers money, markets, business, government, law and citizenship: how societies are organised and run, this topic explains Factors of Production. Economics and civics topics explain how money, markets, laws and government affect people, so each topic here pairs a clear definition with a model.
Check that you can explain Factors of Production in your own words and give one example from everyday life. If you can do that, you have understood the core idea.
Understanding Factors of Production helps you read the news critically and weigh up policies, choices and arguments about society.
Factors of Production in detail
Factors of production are the resources used to make goods and services. Land includes all natural resources, such as soil, minerals, water and forests. Labour is the human effort, mental and physical, used in production. Capital refers to man-made goods used to produce other goods, such as machinery, tools and factories.
Enterprise is the entrepreneur who organises the other factors and takes risks. Each earns a reward: rent for land, wages for labour, interest for capital and profit for enterprise. Businesses combine factors in different amounts, and the best mix depends on cost and technology. Scarcity of these factors is what limits production.
How the interactive helps you understand Factors of Production
Watch the pie chart in the interactive. Use any sliders or buttons it offers to change the values and see how the pie chart responds.
Before you change anything, predict the result. Then change one value at a time and check whether your prediction was right. This is a quick way to build a correct mental model of Factors of Production.
Real-life uses and examples
- Explain Factors of Production to a classmate using a choice you make yourself, such as spending pocket money.
- Give a balanced answer about Factors of Production by considering more than one point of view.
- Relate Factors of Production to a news story about prices, jobs, elections or government spending.
Common mistakes to avoid
- Giving an opinion without evidence or a clear economic or civic reason.
- Confusing a short-term effect with a long-term one.
- Learning the definition without testing it. Use the quiz and the interactive to check that you can apply the idea.
Frequently asked questions about Factors of Production
What is Factors of Production?
Factors of production are the resources used to make goods and services: land, labour, capital and enterprise.
What are the most important points about Factors of Production?
The main points are: Land includes natural resources; Labour is human effort; Capital means machinery and tools.
Why is Factors of Production useful?
Understanding Factors of Production helps you read the news critically and weigh up policies, choices and arguments about society.
How can I practise Factors of Production?
Open the interactive at the top of this page and change the controls one at a time. Predict the result before each change, then take the three-question quiz. A score of two or more marks the topic as complete on this device.
Which topics are related to Factors of Production?
Related topics in Economics & Civics include Demand, Price Elasticity, Money and Its Functions.