Factors of production

How it is used

A first-week topic in economics courses. Each factor earns an income: land earns rent, labour earns wages, capital earns interest and entrepreneurship earns profit. Textbooks also call them inputs or resources.

Example sentences

1. Land, labour and capital are the classic factors of production.

2. A shortage of one of the factors of production, such as skilled labour, can hold back growth.

Common collocations

• the four factors of production
• combine factors of production
• factor income
• factor markets

Related terms

• capitalMachines, buildings, tools and other man-made resources used to produce goods and services; in finance the word also means money invested in a business.
• scarcityThe basic problem that resources such as time, money, land and labour are limited while people's wants are not, so choices always have to be made.
• human capitalThe knowledge, skills, health and experience of workers, seen as an asset that raises productivity and income in the same way as machines or buildings.
• productivityHow much output is produced from a given amount of input, most often measured as output per worker or per hour worked.
• diminishing returnsThe point at which adding more of one input, while the other inputs stay fixed, produces smaller and smaller increases in output.

More terms: Core Concepts

• economy
• microeconomics
• macroeconomics
• opportunity cost
• incentive
• trade-off
• ceteris paribus
• goods and services
• household
• private sector
• market economy
• planned economy