Factors of Production – JSS1 Business Studies Lesson Note (Second Term)

Factors of production are the resources used to produce goods and services. There are four: land, labour, capital and the entrepreneur. Their rewards are rent, wages or salary, interest and profit respectively. Production is complete only when the goods reach the final consumers.

Behavioural objectives

By the end of the lesson, students should be able to:

1. List the four factors of production and their rewards.
2. Explain land, labour, capital and the entrepreneur.
3. State the features and importance of each factor of production.
4. Describe the relationship between the producer and the consumer.

What are the factors of production?

There are four factors of production. Each one has its own reward.

What is land?

Land is a gift of nature. It is the oldest factor of production. It includes water, forests, wind resources, etc. Its reward is rent.

Features of land

1. Land is a gift of nature.
2. Land is immobile.
3. Land is subject to diminishing returns.
4. Its supply is fixed by nature.

Importance of land

1. Land is used for cultivation, i.e. farming.
2. It is used for livestock production, the rearing of animals such as goats, sheep, cattle and poultry, etc.
3. Land is used for wildlife conservation.
4. It is used for residential purposes, e.g. building houses, shops, etc.
5. Land is the source of minerals like gold, petroleum, etc.
6. It can be used as collateral security to obtain bank loans.

What is labour?

Labour means human effort (physical and mental) put into production. Labour could be skilled, semi-skilled or unskilled. The reward for labour is wages or salary.

Features of labour

1. Labour is a mobile factor. It can be moved from one place to another.
2. It is a human factor.
3. It has feelings.
4. Labour cannot be predicted.

Importance of labour

1. Labour is needed to operate machines.
2. It influences other factors of production.
3. It helps in the production of goods and services.
4. It provides the skills needed in production.

What is capital?

Capital is man-made wealth used in production. Its reward is interest.

Features of capital

1. Capital is man-made wealth.
2. It is subject to depreciation.
3. It can change its form.
4. Capital is highly durable.

Importance of capital

1. Capital facilitates production.
2. It increases the standard of living.
3. It attracts investors to the business.
4. It can help in the production of quality goods.

Who is an entrepreneur?

The entrepreneur coordinates and organises all the other factors of production for more productive purposes. He is the risk bearer and manager, and his reward is profit.

Features of the entrepreneur

1. He is the risk bearer.
2. He provides the capital for the business.
3. He is a decision-maker.
4. He employs labour.
5. He controls the other factors.

Importance of the entrepreneur

1. The entrepreneur provides the capital needed for production.
2. He bears the risk of the business.
3. He manages and controls the business.
4. He is the decision-maker.

What is the relationship between the producer and the consumer?

1. A producer is an individual who manufactures the products or goods needed by the consumers.
2. Consumers are those who make use of the goods.

Production starts with the producer and ends with the consumers. Production is not complete until the goods produced reach the final consumers.

Evaluation

1. List the four factors of production.
2. State the reward of each factor of production.
3. Who is an entrepreneur?
4. Give three features of labour.
5. Explain the relationship between the producer and the consumer.

Assignment

1. Give the factors of production and their rewards.
2. Explain land and its features.
3. State four uses of land.