Capital and Entrepreneur as factor of production

CAPITAL AS A FACTOR OF PRODUCTION

CONTENT

1. Meaning
2. Characteristics
3. Types
4. Importance

CAPITAL: is a man- made asset  which is used to aid production . It is goods not wanted directly for its sake, but for the contribution it makes to the production of further consumer and producer goods. It is described as wealth put aside for the creation of further wealth. Wealth, in this sense, is the stock of goods or material possession of an individual, business or organization or nation, including a stock of useful and exchangeable goods of a given time that has money value. Indeed, capital is a material capable of yielding revenue to the owner. From this definition, we realize that ‘Buildings’ that are used for rentage are capitals. ‘Machine’ that is used in industry is also a capital. 

CHARACTERISTICS OF CAPITAL

1. It takes diverse forms.
2. It is man-made factor of production.
3. The reward of capital is interest.
4. It is mobile in nature.
5. It must be transferable and constantly maintained where static
6. It must be capable of being created
7. It must be capable of yielding revenue to the owner
8. It must not be in the hand of one person It must be transferable
9. There should be no difficulty in its being added to

TYPES OF CAPITAL

1. Fixed Capitals: are assets which are durable and do not change with the volume of production, eg machine
   1. Circulating/Working Capitals: are capitals that change with the volume of production or are used up in production, eg raw-materials
   1. Current/Liquid Capitals: are the capitals required for day-to-day running of production of production activities, eg cash
   1. Social Capitals: are capital assets provided by the government that help to aid production activities, eg electricity, motor able roads, pipe-bone water, communication network

IMPORTANCE OF CAPITAL

1. It helps to facilitate mass production
   1. It helps to boost efficiency in production
   1. It helps to increase standard of living of the people
   1. It helps in the location of industry
   1. It helps to improve the quality of products

EVALUATION

1. Define capital as a factor production.
   1. Mention five characteristics of capital.

ENTREPRENEUR AS A FACTOR OF PRODUCTION

CONTENT

• Meaning
  • Functions

ENTREPRENEUR: is a factor of production that co-ordinates other factors of production in order to produce goods and services. That is, it is somebody who provides other factors of production, makes decisions and bears the risks involved in the business.  Labour and entrepreneur laterally means the same thing, but they are economically different, in that, while entrepreneur is active in decision making, control and management of the business, labour is quite passive.

FUNCTIONS OF ENTREPRENEUR

1. An entrepreneur bears all the risks involved in the business .
2. He/she organizes other factors into active resources to yield maximum output.
3. He/she is the decision maker
4. He/she carries out research to improve the standard of his products
5. He/she finances the business
6. He/she finds means of marketing his products
7. He/she ensures efficient and effective management and  organization of the business

EVALUATION

1. Who is an entrepreneur?
   1. List five functions of entrepreneur.

READING ASSIGNMENT

Amplified and Simplified Economics for SSS by Femi Longe Chapter 4 Pages 45-49

Fundamentals of Economics by R.A.I. Anyanwuocha Chapter 4 Pages 25 – 26 Chapter 12 Pages 102 – 105.

GENERAL EVALUATION QUESTIONS

1. What are the basic problems of every society?
   1. Define consumption.
   1. List the importance of opportunity cost to a firm.
   1. State the types of chart used in economic analysis.
   1. What is a scale of preference?

WEEKEND ASSIGNMENT

SECTION A

1. The type of capital which is provided by the government is called…………. A. fixed capital B. social capital C. variable capital D. circulating capital
   1. The most active factor of production is……………. A. capital B. labour C. land D. entrepreneur
   1. A stock of useful and exchangeable goods of a given time that has money value is…………. A. production B. wealth C. property D. distribution
   1. The factor of production which has absolute control and bears the risks of the business is……………. A. entrepreneur B. land C. labour D. capital
   1. ………………. is the goods that is not wanted directly for its own sake. But for the production of further goods. A. exchange B. capital C. choice D. land

SECTION B

1. Define capital and explain the types of capital.

Who is an entrepreneur?