Notes Chapter 7 Class 8 Social Science CBSE Board

Factors of Production

Introduction

• Every product we use – clothes, shoes, furniture, gadgets – goes through a production process.
• Production uses resources or inputs called factors of production.
• Businesses combine these factors to create goods/services and generate employment.

Main Factors of Production

Economists classify them into four types, plus technology as a facilitator:

1. Land (Natural Resources)

• Includes geographical land + all natural resources: soil, water, forests, sunlight, minerals, oil, gas.
• Businesses either buy or rent land/resources.

Examples:

• Land for a shop/factory
• Forests for timber
• Rivers for fishing/hydro power

2. Labour (Human Resources)

Physical and mental effort used in production.

Examples: carpenter, doctor, teacher, farmer, engineer.

Human Capital: Quality of labour – skills, knowledge, expertise, efficiency.

Facilitators of human capital:

1. Education and Training – builds skills, problem-solving ability.
2. Healthcare – keeps workers healthy and productive.
3. Social & Cultural Values – discipline, hard work, punctuality, quality focus.

Challenges: illiteracy, lack of skills, poor health facilities.

3. Capital

Money + man-made resources used for production.

Examples: machinery, tools, buildings, vehicles, computers.

Sources of capital:

• Personal savings, family/friends
• Bank loans (interest paid)
• Stock market (companies sell shares, give dividends)

4. Entrepreneurship

Starting a business, bringing together all factors of production, taking risks.

Entrepreneur – person with an idea who organises, manages, and takes responsibility.

Qualities:

• Problem-solving
• Risk-taking
• Decision-making
• Innovation

Example: J.R.D. Tata – started Tata Airlines (Air India), expanded industries, cared for workers, received Bharat Ratna.

Technology (Facilitator)

• Application of scientific knowledge in production.
• Improves efficiency and reduces costs.

Examples:

• UPI for payments
• GPS for transport routes
• Drones for farming
• Online learning platforms like SWAYAM, National Career Service
• Can replace or complement labour.

Interconnection of Factors

• All factors are dependent on each other.
• Some products are labour-intensive (agriculture, handicrafts) while others are capital-intensive (satellites, microchips).
• Missing/misusing a factor can stop or reduce production.
• Supply chain problems (e.g., during COVID-19) can halt production.

Responsibilities Towards Factors of Production

• Towards natural resources: Use sustainably, reduce waste, avoid pollution.

Towards workers:

• Fair wages
• Safe working conditions
• Skill development
• Workplace rights

Corporate Social Responsibility (CSR): Companies must spend at least 2% of profits on social/environmental activities (India’s CSR law, 2014).

Key Terms

• Human Capital – skills, knowledge, and ability of workers.
• Interest – extra money paid on a loan.
• Dividend – part of company profit given to shareholders.
• Startup – new business with growth potential.
• Productivity – amount produced in a given time.