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In our economy today we have three major factors of production. Which are land, labor, and capitol? For example cotton has all three of these factors of production. It first starts by growing in land. Once it is grown laborers have to cut the cotton. Then the cotton is taken to a factory to be processed and made into other products.
The process of the factors of production starts with land. Land is all natural resources used to produce goods and services. These are all materials found in nature. Land is often used by farmers to produces crops. The farmer tills the land, plants the product and cares for it until it is fully grown. For example a farmer would select an area of land and a certain crop, like cotton. He would then prepare the land for planting the cotton seeds. Lastly he would plant the seeds.
This is where labor comes in. Labor is the effort that a person devoted to a task for which that person is paid. An example would be the people who plant the cotton seeds for the farmer. A crop is too big for a farmer to tend himself so he hires workers to come and tend the crops for him. They plant, cut and pick the cotton. Then the prepare it to be delivered to a factory.
Once the cotton is cut it is taken to a factory to be made into other items. For example blankets or clothes. This is the part of capital. Capital is any human-made resource that is used to produce other goods and services. There are two types of capitol, physical and human. Physical capitol is human-made objects used to create other goods and services such as cotton. Human capital is the knowledge and skills a worker gains through education and experience. Both human and physical capital must be present to produce goods and services.
Land, labor and capital make up the factors of production also known as factor resources. Without any one of these factors the economy could