Theory of Production II – SS1 Economics Lesson Note (First Term)

Factors of production

These are agents of production which are combined in different proportions to achieve production of goods and services. These four factors and their rewards are :

Land                         (Rent)

Labour                    (Wages/salaries)

Capital                      (Interest)

Entrepreneurship (Profit)

Factors determining volume of production

1. Availability of capital to a producer.
2. Availability of raw materials.
3. Level of efficiency in management.
4. Size of market.
5. Efficiency of other factors of production.
6. High level of technology.
7. The nature of the product.

Importance of production

1. It helps to ensure the availability of goods and services.
2. It helps to improve the standard of living of people.
3. It helps to provide employment opportunities to people.
4. It helps to increase wealth.
5. It helps the country’s export potential.
6. It helps in the acquisition of skills. 
7. It helps to generate income for the government.

ASSIGNMENT

1. The reward for entrepreneurship is : a) Rent b) Wages  c) Interest d) Profit

2. Which of the following is a reward for a factor of production  a) Interest b) Donation c) Gift d) Subsidy 

3. Land is a factor of production because of it: a. is a gift of nature b) Contains valuable minerals and resources c) assists in the creation of utility  d) is owned by individuals and governments 

4. Which of the following factors of production consists of man-made goods a) Land b) Labour c) Capital d) Entrepreneur

5. In economics production is completed when  a) goods are manufactured in the factories b) Commodities are sold to the final consumer c) Goods and services get to the retailer d) Producers fix the price of goods produced. 

6. Define Production

7. List the agents/factors of production and give their rewards