Factors of Production

Factors of Production, inputs used in the production process. These are conventionally defined as land, labour, and capital (investment in machinery, for example), but enterprise or entrepreneurship is often listed as a fourth factor of production. The relative availability of the various factors of production in a country (its “factor endowment”) is an important influence on investment and international trade. In order to be successful, a business needs to achieve as good a mix as possible of the factors of production. The desirable mix will change from time to time and will depend on such things as the need to expand, the availability of skilled labour or experienced and enterprising managers, and new technology, as well as, of course, the market price for the different factors of production.