Although land is undeniably crucial to most forms of production, just how essential it really is varies depending on the industry. The income earned from land or other such natural resources is called rent. These resources can be renewable, such as forests, or nonrenewables such as oil or natural gas. They can range from land used for agriculture to that used for commercial real estate, as well as the natural resources derived from land. Some typical examples of natural resources are water, oil, copper, natural gas, coal, and forests. These resources are gifts that are given by nature. “Land” is quite a broad category as a factor of production in that it refers to all natural resources. This table shows who owns the factors of production in four of the most important economic systems, and what these factors are valued for in each system. For example, in a capitalist economy, the factors of production are owned by individuals who use them for their own profit. Sometimes the type of economic system decides the ownership of the factors of production. Factors of Production and Type of Economic System

Influential political economists like David Ricardo, Karl Marx, and Adam Smith initially labeled land, labor, and capital as the factors of production. Other strains of economic theory also contribute to our current understanding, including socialism’s view of labor as one of the factors. Our understanding of the concept of factors of production is rooted for the most part in neoclassical economics. Similar Posts: History of the Concept of Factors of Production

Four factors of production.