Скачать или смотреть Ch 3 Unit 1 Theory of Production Part 1 Meaning of Production, 4 Factor of Production| CAFoundation

Hello Students 👋
Welcome to Shridhar Institute of Commerce, I’m CA Mithun Jaiswal Sir, and in today’s lecture, we’ll discuss one of the most important topics from CA Foundation Business Economics —
Chapter 3: Theory of Production and Cost, Unit 1: Theory of Production.

We’ll cover the Four Factors of Production — Land, Labour, Capital, and Entrepreneur — along with their Characteristics, Types of Capital, and Stages of Capital Formation.
Let’s begin! 🚀
heory of Production

The Theory of Production studies how goods and services are produced by combining various inputs (factors of production).
It focuses on the relationship between input and output in the production process.

2️⃣ Four Factors of Production

Economists classify the inputs used in production into four major factors:
👉 Land
👉 Labour
👉 Capital
👉 Entrepreneur

Let’s understand each in detail 👇

🌍 Land

Meaning: Land refers to all natural resources used in production — such as soil, water, forests, minerals, sunlight, etc.

Characteristics of Land:
Land is a free gift of nature.
Land is immobile — it cannot be moved.
Land is indestructible.
Land has no cost of production.
Supply of land is fixed.
Land is heterogeneous — different lands have different qualities.

🧑‍🏭 Labour

Meaning: Labour refers to any mental or physical effort made by humans for the purpose of earning income.
Characteristics of Labour:
Labour is human effort.
Labour is perishable — it cannot be stored.
Labourer and labour are inseparable.
Labour has less mobility compared to capital.
Labour is active — it initiates production.
Labour has diminishing returns — productivity decreases beyond a limit.

💰 Capital

Meaning: Capital refers to all man-made resources used in production such as machinery, tools, buildings, raw materials, etc.
Characteristics of Capital:
Capital is man-made.
Capital is produced means of production.
It is durable and productive.
It earns interest as a reward.
Capital is mobile.
Types of Capital
Fixed Capital: Used repeatedly (e.g., machines, tools, buildings).
Circulating Capital: Used only once (e.g., raw material, fuel).
Real Capital: Physical assets used in production.
Human Capital: Knowledge and skills of human beings.
Social Capital: Infrastructure like roads, schools, hospitals.

Stages of Capital Formation
Capital formation involves three main stages:
Creation of Savings — Households save a portion of their income.
Mobilisation of Savings — Savings are collected by financial institutions.
Investment of Savings — Funds are invested in capital goods to increase roduction.

So students, these are the Four Factors of Production — Land, Labour, Capital, and Entrepreneur — which together form the foundation of the production process.
Understanding their features helps you interpret how resources are combined to produce goods efficiently.

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