Factors of production
Definition. Factors of production are the resources used to produce goods and services, conventionally classified as land, labour, capital, and enterprise. Because these resources are scarce while wants are unlimited, society faces the central economic problem of choosing how to allocate them, which gives rise to opportunity cost.
Each factor earns a return: land earns rent, labour earns wages, capital earns interest, and enterprise earns profit for bearing risk and organising the other factors.
This term belongs to Opportunity Cost in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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