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ACCA Exam Study Text
ACCA Paper F1 - Exam Study Text - Accountant in Business
ACCA Paper F2 - Exam Study Text - Management Accounting
ACCA Paper F5 - Exam Study Text - Performance Management
ACCA Paper F9 - Exam Study Text - Financial Management
ACCA Paper P3 - Exam Study Text - Business Analysis
ACCA Practice Questions and Answers
ACCA Paper F1 - Practice Questions and Answers - Accountant in Business
ACCA Paper F2 - Practice Questions and Answers - Management Accounting
ACCA Paper F3 - Practice Questions and Answers - Financial Accounting
ACCA Paper F5 - Practice Questions and Answers Diagnostic Tests - Performance Management
ACCA Paper F9 - Practice Questions and Answers Diagnostic Tests - Financial Management
ACCA Paper P3 - Practice Questions and Answers - Business Analysis
ACCA Revision Mnemonics and Charts
ACCA Paper F5 - Revision Mnemonics and Charts - Performance Management
ACCA Paper F8 - Revision Mnemonics and Charts - Audit and Assurance (International)
ACCA Paper F9 - Revision Mnemonics and Charts - Financial Management
ACCA Paper P3 - Revision Mnemonics and Charts - Business Analysis
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What are the factors of production?
(Useful for ACCA F2 exam)
In economics, factors of production mean inputs and finished goods mean output. Input decides the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called as "Production Function".
All factors of production like land, labour, capital and entrepreneur are required altogether at a time to produce a commodity. In economics, production means creation or an addition of utility. Factors of production (or productive inputs or resources) are any commodities or services used to produce goods and services.
'Factors of production' may also refer specifically to the primary factors, which are stocks including land, labour (the ability to work), and capital goods applied to production. 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.
'Factors of production' may also refer specifically to the primary factors, which are stocks including land, labour (the ability to work), and capital goods applied to production. 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.
In macroeconomics, capital or capital goods or real capital refers to factors of production used to create goods or services that are not themselves significantly consumed (though they may depreciate) in the production process. Capital goods may be acquired with money or financial capital.
In finance and accounting, areas that concern ACCA accountants, capital generally refers to financial wealth, especially that used to start or maintain a business. In classical economics, capital is one of three (or perhaps four) factors of production. The others are, as indicated above, land, labour and organisation, entrepreneurship, or management.
The knowledge contained in this free ACCA study tip is examinable in the ACCA Paper F2. For more information or study materials on ACCA Paper F2, see the full list of ACCA E-books available from TonySurridge.
