8. Factors of production

There are 4 factors of production: land, labour, capital and organization or entrepreneurship.

As an economic term land means the gifts of nature or natural resources not created by human efforts. They are the things provided by nature that go into creation of goods and services.

The 2 f. is labour – people with all their efforts and abilities. Unlike land, labour is a resource that may vary in size over time.

The 3 f. is capital – the tools, equipment and factories used in production of goods and services. It is a produced factor of production, a durable input which is itself an output of the economy.

Entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services, is the 4 factor of production. The entrepreneurship brings together with the other 3 factors – l.,l.,and cap.

9.Economic systems

There are 3 major kinds of economic systems: traditional, command and market.

In economic with traditional economy nearly all economic activity is the result of ritual and custom. The main advantage – is that everyone has a role in it. This helps keep economic life stable. The main disadv – is that is tends to discourage new ideas and even punishes people for breaking rules or doing things differently.

A command economy – one where a central authority makes most of the What, How and for Whom decisions. Economic decisions are made at the top and people are expected to go along with choices made by their leaders. It means that major economic choices are made by the government. The major adv – is that it can change direction drastically in a relatively short time. Disadv – is that it does not always meet the wants and needs of individuals.

In a market economy the questions of What, How, and for Whom to produce are made by individuals and firms is an arrangement that allows buyers and sellers to come together to conduct transaction. A market economy has several major advantages. First, a market economy is flexible and can adjust to change over time. The 2- is the freedom that exists for everyone involved: 3 – incredible variety of goods and services available to consumers.

10. Business organizations

There are three major kinds of business organizations: the sole proprietorship², the partnership³ and the corporation

The most common form of business organization is the sole proprietorship — a business owned and run by one person. The main advantage of a sole proprietorship is that it is the easiest form of business to start and run. The major disadvantage of a sole proprietorship is the unlimited liability⁸ that each proprietor faces. Since the business and the owner are legally the same, the sole proprietor is liable for⁹ all financial losses or debts that the business may incur A second disadvantage of the sole proprietorship is that it has limited financial resources.

A partnership is a business that is jointly owned by two or more people who have combined their talents and resources for the purpose of earning a profit. Partnerships are most common in such professional fields as medicine, law, accounting, stockbrokerage¹, but they are also found in manufacturing, wholesaling and retailing².

Partnerships have more advantages than sole proprietorships. Like sole proprietorship they are easy to form and often get tax benefits⁵ from the government. Partnerships have certain disadvantages too. The major disadvantage is unlimited financial liability. It means that each partner is responsible for all debts and is legally responsible for the whole business.

. A business corporation is an institution established for the purpose of making profit. There are several advantages of the corporate form of ownership. The major advantage is the ability to acquire greater financial resources than other forms of ownership. The next advantage is that the corporation attracts a large amount of capital and can invest it in plants, equipment and research. It can offer higher salaries and thus attract talented managers and specialists. Corporations have great capacity for growth and expansion.Corporations face some major disadvantages. It is difficult and expensive to organize a corporation. The process of obtaining a charter usually requires the services of a lawyer. Most small firms prefer to avoid these expenses by forming proprietorships and partnerships