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Factors of production in the economy

Production is a fairly complex process, which depends on many factors. To draw up a simplified model in the economy, however, it is customary to single out four main factors, without which production is not possible in principle in modern conditions. This should not be confused with economic factors of production and, so-called harmful and dangerous factors of production , which include: dust, bright light, dangerous gases, etc. From an economic point of view, the factor is a constructive element, determined by the role that it plays in the production process.

Analyzing all the existing factors of production in the economy, namely labor, land, capital and the entrepreneurial factor, it is impossible not to note that the most important among them is human labor. In ancient times, when machines did not exist in principle, labor, in fact, was the only factor, and it was work that determined the value of a particular good. However, today the role of man in the production process, due to automation of production, is significantly reduced. On the other hand, the same machines are produced with the direct participation of a person who, in addition, serves them and organizes the accounting and sale of products of production. Thus, the role of labor is still high, and before the era in which the machines will cope with all the duties of a person, we are still far away.

Moreover, production equipment itself is not included in the factors of production in the economy. Since the equipment is purchased for money, it can be combined with raw materials and materials, patents, etc. In general, everything that is bought for money, and is necessary for the implementation of the production process itself, is determined by such a factor as capital. Capital also refers to the money that needs to be invested in order to enable people to work in production and increase added value. The role of capital is still controversial, as supporters of leftist political ideas insist that capital is nothing more than labor taken from workers through a profit mechanism.

One should not confuse capital with such a factor as land. Features of demand for factors of production: labor and capital, similar to the market mechanism of pricing, do not work in relation to the land. Earth is everything that belongs to nature. Thus, the nature that provides us with an area for production and mineral resources, also takes an active part in the production cycle. The main feature of this factor is that it exists in a limited amount, so with the help of market mechanisms, people must determine what needs to use the natural heritage.

Finally, the entrepreneurial factor included in the production factors in the economy is the last one, which determines the role of businessmen in the production process who are ready to take risks and are able to organize the process itself. The entrepreneurial factor is called upon to explain the superprofits existing in capitalism, i.e. The profit exceeding the normal payment for the capital. The high profit of the enterprise is considered justified, since, according to supporters of market capitalism, it is the merit of an entrepreneur who has managed to either organize the process effectively or has taken a significant risk. However, this factor is not currently recognized by all economists.

Some economists, by contrast, tend to further expand the factors of production in the economy and include time, ideas, etc. Thus, the question of factors is still very controversial, and its interpretation, in many respects, depends on political views.

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