Traits and Characteristics of a Successful Entrepreneur: The success or failure of an enterprise depends on the efficiency of an entrepreneur. The are two kinds of factors of production. Labor, as a factor of production, refers to: answer choices . An individual, who creates an enterprise is called entrepreneur. It can be a new method of decreasing the cost of production, improving the design of the product, and increasing the market share by beating the competitors. iii. LABOUR AS A FACTOR OF PRODUCTION Labour refers to any physical or mental effort that helps in the production of goods and services TYPES OF LABOUR Skilled labour-Those that use more of their mental effort than their physical strength in production. The factors of production can be used as complementary as well as substitute of each other. Trees, game animals, water, minerals—these are all included in the economic concept of land. Therefore, creativity is a prerequisite for innovation. It is a human factor. They are secondary because we get them from land, labor, and capital. This implies that the factors of production should be used in combination, so that the production target can be achieved. He/she identifies and traps the existing opportunities in the market, converts idea into action, bears the risk and uncertainties involved, and takes promotional activities to launch the enterprise. Salient features: 1. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. Schumpeter exemplified this concept with the invention of a steam engine, which was used to develop a horseless carriage. capital. According to Kirzner (1979), an entrepreneur is the arbitrageur, who buys a product in lower price and sells the same product in higher price to earn profit. They are usually adequately trained and educated. The factors, of production are the resources that include land, labor, capital, and enterprise. In addition, the entrepreneur should communicate his/her with all shareholders of the enterprise, which, in turn, motivates them to achieve the set goals. Refers to the division of labor on the basis of business processes and sub-processes. But there are many barriers to the movement of labour from one place to another. ii. Risk Taking and Decision Making Ability: Refers to the capability of entrepreneurs to make decisions under the conditions of uncertainty. A monotonous work makes the individual think in the same direction. A) intellectual B) emotional C) unionized D) entrepreneurial Answer: A Explanation: A) Labor is a factor of production that refers to any physical or intellectual work that people contribute to a business's production. For example, if the wage of a worker reduces, then other family members of worker start working to meet up the requirements of their family. The firm's production data is given in the table below. Which of the following is NOT an example of a factor of production? The value of labor depends on the skills, education and motivation of workers. As a promoter, an entrepreneur conducts feasibility studies, decides the form of organization, assembles the required resources, such as capital and human resource, and shapes up the enterprise. However, if the organization has shortage of capital, then it would use more labor instead of investing on advance technology and machines. Implies that if workers are divided as per their skills and efficiency to perform different tasks, this would lead to an increase in the number of jobs. It is an active fact… Labor is the effort that people contribute to the production of goods and services. C apital as Factor of Production:. Product market. Which of the following elements of their. The innovation can be in following five fields: Economist Joseph Schumpeter has given a significant contribution in understanding the concept of entrepreneurship. Change in the price of labor would affect the supply of labor. Moreover, capital also plays a major role in economic development by raising productivity. If tasks are specified, workers need to perform the same task again and again, which make them efficient in that particular task. The person in charge of organisation is known as an organiser or an entrepreneur. . In case of labor, supply of labor decreases with an increase in prices (wages) and vice versa. They facilitate production but do not become part of the product. Labor This refers to the manpower or work done by human beings. The idea of factors of production is a relatively recent development, but the idea of value being distributed between the different forces that go into the production of goods and services can be traced to the classical economists Adam Smith and David Ricardo, who referred to land, capital, and labor as the “component parts of price.” Labor is commonly thought of a group of unskilled labor working in factories. The production process of an organization can be efficient, if there is an optimal use of factors. An entrepreneur should be ready to bear risks and uncertainties involved in the business. It also refers to man's mental and physical exertions generated in the process of production. Otherwise, it is hard to make a single pin by one worker performing all the 18 processes. Among capital goods, raw material and goods under process are temporary because these goods are repurchased after a period of time. There are 18 processes require to manufacture a single pin. He/she does not hesitate in doing new things and adopting new methods of production. The factors are also frequently labeled "producer goods or services" to distinguish them from the goods or services purchased by consumers, which are frequently labeled "consumer goods". Considered to be available in fixed quantity; therefore, does not have a supply price. iv. In economic terms factors of production can be defined as inputs that are used for the production of goods or services with the aim to make economic profit. To put it in different terms, the factors of production are the inputs needed for supply. Involvement of women affects their personal lives and employment of children causes deterioration of their future. The income or reward earned from land as a factor of production is rent. capital. He stated that division of labor plays a vital role in increasing the productivity of labor. Some of its disadvantages are as follows: Implies that performing the same task again and again makes the work less interesting, which results in decrease in the motivation level of workers. The success or failure of an enterprise depends on the efficiency of the entrepreneur. No two types of labour are the same. competition . Test-Bank-for-Better-Business-2nd-Edition-by-Solomon, !%20MAN%20200%20--%20Entrepreneurship%20Review%20%20--%2075%20Q%20with%20Explanations, Central New Mexico Community College • BA 2281, Saudi Electronic University • ECOM-101 ECOM-101. Implies that repetitive working on the same process makes workers expert of that process, which leads to reduction in errors. However, capital is one of the important factors as production of any kind of goods and services is dependent on capital. v. Considered to have infinite variation in terms of fertility. However, in economics, land, a factor of production, has a much wider scope. Government. Tags: Question 12 . A) Labor is a factor of production that refers to any physical or intellectual work that people contribute to a business's production. Emotional work is not considered part of a business's labor requirements. An entrepreneur is an individual, who establishes an enterprise. The second factor of production is labor. Creativity and innovation are always used interchangeably, but there is a huge difference between both of these two words. The term “factors of production” refers to anything that is used by a firm in order to make a final product. Entrepreneurial work might be included in a company's labor costs, but such work could be either physical or intellectual, and therefore would not necessarily describe a type of work that was not physical. all worker in business. A. Schumpeter, a German economist, an entrepreneur has the power to change the way an economy is moving. This motivates producers to increase the level of production. It consists of those goods which are produced by the economic system and are used as inputs in the pr oduction of further goods and services. Meaning and Definition: C apital is an important factor of production. Related terms. 2. Factors of production refer to: a) all of the goods that are used in the production process. The employees receive wages in exchange for their efforts. Refers to the ability of an entrepreneur to provide things in a novel manner. Therefore, saving is necessary for capital formation. Some processes of an organization are so long, thus, cannot be completed by a single worker or he/she would require more time to complete those processes. A company's labor force, could be either unionized or nonunionized, independent of the type of work, whether physical or. 4 Factors of Production In Economics - Meaning ↓ Factors of production refers to inputs required for conducting production. If the process is divided among a number of workers, they would be able to perform it efficiency and in less duration of time. Labor as a Factor . Tags: Question 12 . labor land entrepreneuship +6. Entrepreneurial or technological work might be included in a company's labor costs, but such work could be either physical or intellectual, and therefore would not necessarily describe a type of work that was not physical.   iv. Factors of production are defined by German economist Karl Marx in his book Das Kapital as labor, subjects of labor, and instruments of labor: the term is equivalent to means of production plus labor.The factors of production are often listed in economic writings derived from the classical school as "land, labour and capital". SURVEY . Refers to one of the most required attributes in an entrepreneur that brings success in everything they do. Economists use the production function to describe the relationship between inputs (i.e. Implies that division of labor leads to innovation of new ideas because the work becomes mechanical rather than mental. Labor is considered as the weakest commodity in terms of bargaining power. Capital includes types of property, such as machinery and tools, that can be used to produce things. This refers to all the natural resources that are available to be used in the production of goods. An enterprise is composed of individuals and physical assets with a common goal of generating profits. For example, in India, Kashmir is famous for its carpets and shawls, whereas Punjab is popular for agriculture. A successful entrepreneur should strive to bring dynamism to industries and markets. According to J. Capital may be physical or tangible or intangible. Examples are teachers, lawyers, economists, among others. Factors need to outsource production c. Resources used to make goods and services d. A firm's output from its production process . Adam Smith- the father of economics laid a greater emphasis on the concept of division of labor in his book, “An Inquiry into the Mature and Causes of the Wealth of Nations” in 1776. Let us discuss about division of labor in detail. v. Adjustments in supply and demand of labor is difficult because it is difficult to increase or decrease labor instantly. Therefore, Schumpeter held the argument that creative destruction is the main factor behind economic growth and industry dynamism. Labor, as a factor of production, refers to: all workers … entrepreneurship. Neither do they transform significantly in the production process. 11) Labor is a factor of production that refers to any physical or _____ work people contribute to a business's production. This ultimately results in reducing time. all worker in business. Brings positive impact on the functioning of an organization. In this type of division of labor, the processes are performed by specific cities or towns that are specialized in it. One cannot store labour. He/she should replace inferior innovations across markets and industries with new products. In such a case, land and capital are complementary to each other. For example, before the advent of mobile phones, pagers were very popular among people, but with the invention of mobile phones, pagers became obsolete. Indicates the ability of an entrepreneur to solve problems rather than avoiding them. 30 seconds . Refers to the characteristic of an entrepreneur to visualize the way to successfully complete tasks to achieve set goals and objectives. There are different types of division of labor, which are explained as follows: Refers to the division of labor on the basis of their skills and occupations, such as carpenters and blacksmith. It does not include money. Entrepreneurial work might be included in a, company's labor costs, but such work could be either physical or intellectual, and therefore, would not necessarily describe a type of work that was not physical. The marginal product of labor (or MPL) refers to a company’s increase in total production when one additional unit of labor is added (in most cases, one additional employee) and all other factors of production remain constant. Implies that an entrepreneur can be successful if he/she is guided by inner self and motivated to accomplish set goals. In case of other commodities, supply rises with the rise in prices. Mainly, the factors of production consist of any resource that is used in the creation of a good or service. 30 seconds . According to him, “An entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation.” In the view of Schumpeter an entrepreneur employs “the gale of creative destruction.”. Thus, new products and technologies developed by entrepreneurs over time make current products and technologies obsolete. Similarly, when skilled labor is available to produce goods and services, then only the organization would invest capital for production purpose. He also advocated that an entrepreneur is the person who combines production factors to make the production process efficient. An entrepreneur should identify the cause of problems that come in the way and searches potentially unique ideas to solve them. This is possible if those 18 processes delegated among a number of workers. In addition, he/she should strive to invent new products and services or bring innovation in the existing products and introduce them in the market. They should have courage to put everything on stake to convert his/her idea into a reality. Capital is a factor of production that has been produced for use in the production of other goods and services. Labor cannot be separated from laborer. answer choices . This leads to variation in the prices of land. Q. The pin making function of an organization involves 18 processes. Labor is defined as the perishable factor of production that has no reserve price. Therefore, if these tasks are divided among a number of workers, then it would be easier to produce large number of pins in a day. This factor involves human services and efforts for the production of goods or services. The summary above refers to many examples of the factors of production. This formation of car from steam engine was not the development of a new technology, but the application of existing technologies in a novel manner. It is a useful factor of production, but is available in limited quantity. According to him, an entrepreneur is a foresighted person having a risk taking and innovation capability. In literary sense, land is regarded as soil. 1-2 What is the difference between a good and a service, and what are the factors of. According to Eraser, “Factor of production as a group or class of original productive resources.”. He/she should either switch to an alternative strategy to reach a goal or generate innovative solutions. Signifies that an entrepreneur needs to employ individuals with the required skill-sets for operating in the different functions of the organizations. An entrepreneur acts as a catalyst for economic change and research indicates that entrepreneurs are highly creative individuals who imagine new solutions by generating opportunities-for profit or reward.”, In the words of Peter F. Drucker, “An entrepreneur searches for change, responds to it and exploits opportunities. the laborers can relocate to the site of work. Labour: Labour is the human input into production e.g. Thus, labour is a physical or mental effort of human being in the process of production. A work that is undertaken by an individual for the sake of interest and pleasure, then the individual would not be regarded as labor in economics. If these 18 processes are performed by a single worker, it would not be possible to complete the whole function or it may take much time to produce a single pin. According to Stingier, “the division of labor is not a quaint practice of eighteenth century pin factories; it is a fundamental principle of economic organization.” Therefore, division of labor is useful to an organization in many ways. So we can say labour is not as mobile as some other factors of production like Capital. Labour actually means any type of physical or mental exertion. 30 seconds . Innovation is the specific tool of an entrepreneur.”, In the words of Richard Cantillion, “An entrepreneur is the agent who buys means of production at a certain price in order to combine them into a product that is going to sell at prices that are certain at the moment at which he commits himself to his costs.”, According to International Labor Organization, “Entrepreneurs are people who have the ability to see and evaluate business opportunities together with the necessary resources to take advantages of them and to intimate appropriate action to ensure success.”. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. only hourly wage earners. However, in economic terms, a work, physical or mental, carried out for monetary purpose is called labor. Advantages and Disadvantages of Division of Labor: Division of labor is useful for an organization in many ways. Refers to one of the major adverse effects of division of labor. The income for land is usually called rent. It is a specific instrument of entrepreneurship to add value to products or services or the unique recombination of resources to give something new to the world. The market is never saturated for an entrepreneur. Apart from this, land cannot be regarded as capital because of the dissimilarities between the characteristics of land and capital. These natural resources includes raw materials from the ground, non-renewable resources such as petroleum and renewable resources such as timber. Suppose a computer manufacturer is producing in the short run when capital is fixed and the only variable factor of production is labor. In such a case, capital and labor act as substitute of each other. It is perishable, meaning that if labour has not worked on a particular day, it cannot be fully recovered by overtime working on some other day. It is focused on providing goods and services keeping in view various aspects, such as financial, commercial, and industrial. According to Marshall, “Any exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work is called labor.”. In addition, they strive for excellence in their field. This peculiarity of labor differentiates it from rest of the factors of production. Disclaimer Copyright, Share Your Knowledge The term "factors of production" refers to: a. Scarcity of time to make goods b. LABOR Labor as a factor of production is defined as all forms of human efforts put into or utilized in production. Helps an entrepreneur to adapt to the changing marketplace, strategies of competitors, and preferences of customers. only hourly wage earners. Which of the following is NOT an example of a factor of production? Refers the skill of an entrepreneur to manage time effectively and efficiently. Where labor refers to the efforts of employees in the production process, human capital refers to the totality of less tangible qualities like knowledge, education, and social or cultural attributes that distinguish one source of labor from another. This may discourage individuals to think freely and generate ideas. However, plant and machinery are goods that are permanent and are purchased only once. Labor is a factor of production that includes both skilled and unskilled workers. The good is bought for its intrinsic use. Privacy Policy3. Economy. Unskilled; Semi-skilled; Skilled; Professional; Capital. Therefore, workers can freely think and generate innovative ideas. Labour is directly associated with human effortsand due to this reason fair wages, good treatment, work environment and working conditions are necessary for labourers. Labor. Share Your PPT File, Production Possibility Curve – (With Diagram). They express confidence in completing any task or meeting any challenge. An entrepreneur has a strong belief in self and own abilities. In general terms, capital refers to the part of an individual’s income that is used for Income creation purposes. Refers to one of the most indispensable quality of an entrepreneur that decides the success of the organization. It includes all types of human efforts - physical exertion, mental exercise, use of intellect etc. Question . Therefore, a nation should have an adequate amount of capital to invest in various economic development projects, such as construction and renovation of infrastructure. Implies that division of labor helps in increasing the quality and quantity of product. Some examples of factors of production are labor (the work was done by people), capital (the machines used to makes products), land, and so on. Materials and energy are considered secondary factors … Regarded as a permanent input having certain inherent properties, which are original and indestructible. Some of the functions of an entrepreneur are described as follows: Implies that an entrepreneur identifies business opportunities, selects the most suitable business opportunity, and converts that opportunity/idea into a successful business venture. This problem has been solved! He also held a view that entrepreneurship results not only in new industries, but also in new combinations of currently existing inputs. b) land, labor, capital, and other primary inputs into production. The compensation given to labourers in return for their productive work is called wages (or compensation of employees). Some of the entrepreneurship experts have given the following definitions of entrepreneurship: According to Encyclopedia Americana (1988), “An entrepreneur is a businessman who assumes the risk of bringing together the means of production including capital, labor and material and receives his reward in profit from the market value of his product”. The effort which the economist regards as qualifying may be either manual or mental, although in earlier periods, and apparently under communism , manual labour alone was considered a productive factor. Labor, as a factor of production, refers to: answer choices . This is because laborer needs to sell his/her labor. Labor constitutes one of the important factors of production. Households provide labor, they rent/sell land and capital and provide entrepreneurship to businesses.) The formulation of an effective business plan and sound execution help an entrepreneur to maximize the chances of success. He/she should possess some abilities and skills to perform different activities successfully. Question: Labor, As A Factor Of Production, Refers To: All Workers In Business Rent And Wages Full Employment Tools And Wages Only Hourly Wage Earners . Share Your PDF File It also helps the entrepreneur to make necessary changes in his/her products and services as per the market conditions. Additionally, he/she should need to develop technical skills to understand, communicate, and lead the technical staff of the enterprise. The income or reward earned from land as a factor of production is rent. Wages ( or compensation of employees ) the different functions of the organization which combines with other factors production!, physical or mental exertion created for commercial purposes or business ventures and efforts. Of physical or case, capital, and machinery are goods that are made by employees during production! Necessary in order to be able to contribute to a business or?. Facilitate production but do not become part of a business or company a passive factor whereas labour is an factor! Before acting upon platform to help students to discuss anything and everything about economics entrepreneurs! Important factors of production, labor, as a factor of production, to. 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