Factors of production

Factors of production

In economics, factors of production, resources, or inputs are what is utilized in the production process in order to produce output-that is, finished goods. The amounts of the various inputs used determine the quantity of output according to a relationship called the production function. There are three basic resources or factors of production: land, labour, and capital .Some modern economists also consider entrepreneurship or time a factor of production. These factors are also frequently labeled "producer goods" in order to distinguish them from the goods or services purchased by consumers, which are frequently labeled "consumer goods." All three of these are required in combination at a time to produce a commodity.

Factors of production may also refer specifically to the primary factors, which are land, labor (the ability to work), and capital goods applied to production. Materials and energy are considered as secondary factors in classical economics because they are obtained from land, labour and capital. The primary factors facilitate production but neither become part of the product (as with raw materials) nor become significantly transformed by the production process (as with fuel used to power machinery). Land includes not only the site of production but natural resources above or below the soil. Recent usage has distinguished human capital (the stock of knowledge in the labor force) from labor.Entrepreneurship is also sometimes considered a factor of production. Sometimes the overall state of technology is described as a factor of production. The number and definition of factors varies, depending on theoretical purpose, empirical emphasis, or school of economics.

Managerial Economics : Definition, Nature, Scope

Managerial economics is a discipline which deals with the application of economic theory to business management. It deals with the use of economic concepts and principles of business decision making. Formerly it was known as 'Business Economics' but the term has now been discarded in favour of Managerial Economics.

Managerial Economics may be defined as the study of economic theories, logic and methodology which are generally applied to seek solution to the practical problems of business. Managerial Economics is thus constituted of that part of economic knowledge or economic theories which is used as a tool of analysing business problems for rational business decisions. Managerial Economics is often called as Business Economics or Economic for Firms.

Definition of Managerial Economics:

'Managerial Economics is economics applied in decision making. It is a special branch of economics bridging the gap between abstract theory and managerial practice.' - Haynes, Mote and Paul.

'Business Economics consists of the use of economic modes of thought to analyse business situations.' - McNair and Meriam

'Business Economics (Managerial Economics) is the integration of economic theory with business practice for the purpose of facilitating decision making and forward planning by management.' - Spencerand Seegelman.

'Managerial economics is concerned with application of economic concepts and economic analysis to the problems of formulating rational managerial decision.' - Mansfield