Brief notes on the nature and features of the supply of factors like land, labor and capital

Like the demand for factors, supply of factors plays an important role in the determination of factor pricing. The nature and features of the supply of factors like land, labor, capital, and not similar. The higher the remuneration given to the factors the higher would be their supply. So the supply curve of an industry for a particular factor will be upward sloping. The factors of production are discussed in brief as under.

Land:

Land is the primary factor of production. In short, Land is anything on earth, below earth and beyond earth; Land is a free gift of nature. Its supply is fixed. It is immobile. It has no supply price or cost of production.

Moreover, land is heterogeneous. Its powers are original and indestructible. Land is subject to the law of diminishing returns. It is permanent. It is a passive factor of production.

Labor:

Like land, labour is also a primary factor of production. In economics, labour refers to any work physical or mental, or both partial or complete which is meant for earning an economic reward either in cash or in kind, or in both. Labour is inseparable from the labourer. It is perishable. The labourer sells his service and not himself. It is relatively immobile. Labour has a weak bargaining power. The supply of labour cannot be rapidly adjusted with demand. The supply of labour is influenced by many factors like the size and composition of population, people’s preference between work and leisure, the number of hours of work, wage rate etc. The supply of labour to a particular industry is relatively elastic. Both wage rate and the supply of labour are directly related.

Capital:

Capital is a manmade agent of production. It is used for the production of wealth. It refers to that part of wealth, which can be used for further production. All producers’ goods meant for indirect satisfaction are capital in Economics. All material equipments used in production are capital. Capital is manmade. It is not an original factor of production. Capital is a produced means of production. It is stored up labour. It is that material agent of production, which is the product of past laboour.

According to Fisher, “Capital is that property which is the product of past labour but which is used as a means of further production.”

In the words of Marshall, “Capital is that part of wealth which yields income.” Capital is productive, prospective and nonpermanent. It grows out of saving. All capital is wealth. Capital is a passive factor like land. The supply of capital in an economy depends on people’s willingness and ability to save. Besides, it also depends on opportunities for saving. If people consume more, less is saved and if they consume less, more is saved. More saving of the people will increase the supply of capital in an economy. Poverty has been responsible for the slow growth of capital in an underdeveloped country like India. So there is vicious circle of poverty in the developing countries.