The inputs or resources used in the production process are called factors of production by economists. The myriad of possible inputs are usually grouped into five categories. These factors are:
- Raw material
- Machinery
- Labour services
- Capital goods
- Land
In the “long run”, all of these factors of production can be adjusted by management. The “short run”, however, is defined as a period in which at least one of the factors of production is fixed.
A fixed factor of production is one whose quantity cannot readily be changed. Examples include major pieces of equipment, suitable factory space, and key managerial personnel.
A variable factor of production is one whose usage rate can be changed easily. Examples include electrical power consumption, transportation services, and most raw material inputs. In the short run, a firm’s “scale of operations” determines the maximum number of outputs that can be produced. In the long run, there are no scale limitations.
Read more about this topic: Production Theory
Famous quotes containing the words factors and/or production:
“Language makes it possible for a child to incorporate his parents’ verbal prohibitions, to make them part of himself....We don’t speak of a conscience yet in the child who is just acquiring language, but we can see very clearly how language plays an indispensable role in the formation of conscience. In fact, the moral achievement of man, the whole complex of factors that go into the organization of conscience is very largely based upon language.”
—Selma H. Fraiberg (20th century)
“The society based on production is only productive, not creative.”
—Albert Camus (1913–1960)