Question

Read the extract and answer the following questions.

Shruti and her friends have an idea to start selling makeup kits. They already have saved money for the merchandise, models and displays. Since they all own the company, they will work for free.

1. Name the factor of production which is not mentioned.
2. Explain any four characteristics of the above (a) factor of production.

Answer 1

1. The factor of production that is not mentioned is Land.
2. Land is a different type of factor of production than others. It possesses the following characteristics:
   1. Free Gift of Nature: Land is a gift of nature given to man free of cost. Man has to spend nothing to obtain it. He has to make no effort to get it. Land has no cost of production. All other factors of production have to be produced at a cost.
   2. Limited in Supply: A peculiar feature of land is its fixed supply. Other factors of production can be increased in supply to a great extent. No human power can alter the supply of land. So land is the only factor of production whose supply is fixed regardless of price. The supply curve of land is a vertical line at a given quantity.
   3. Primary Factor of Production: Land is a basic factor of production. We have to use land in every kind of production. For example, in industries, it helps to provide raw materials and sites for industrial buildings, and in agriculture, crops are produced on land.
   4. Passive Factor of Production: Land is a passive factor of production because it cannot produce anything by itself. For example, land cannot produce wheat by itself, it requires services of labour and capital.