Chapter 7: Factors of Production

NCERT Questions & Answers

Q1. How are the factors of production different from each other? What are the difficulties you faced in classifying the factors of production in the exercise given in-text?
Answer:
Factors of production differ in nature:

Land: Natural resources like soil, water, minerals.
Labour: Human effort, both physical and mental.
Capital: Man-made resources like tools, machinery, and money.
Entrepreneurship: The initiative to organise the other three factors.

Difficulties: Some resources overlap. For example, technology can be classified as capital, but it also acts as a facilitator. Similarly, knowledge belongs to labour but is also counted under human capital.

Q2. How does human capital differ from physical capital?
Answer:

Human capital: Knowledge, skills, health, and abilities of people that make them productive.
Physical capital: Tangible assets like machinery, tools, and buildings.
Human capital cannot be seen or touched but is vital for using physical capital effectively. Without skilled workers, machines remain underutilised.

Q3. How do you think technology is changing how people develop their skills and knowledge?
Answer:
Technology has transformed learning and skill development by:

Providing online courses (like SWAYAM, MOOCs).
Offering virtual training and simulations for jobs.
Allowing access to global resources via the internet.
Helping people upgrade skills flexibly while working.
Thus, technology has made knowledge more accessible, affordable, and widespread.

Q4. If you could learn one skill today, what would it be and why?
Answer (sample):
If I could learn one skill, it would be coding. Coding is important in today’s digital world. It opens opportunities in jobs like app development, robotics, and artificial intelligence. Learning coding would also help me solve real-life problems with technology and keep pace with modern innovations.

Q5. Do you think entrepreneurship is the ‘driving force’ of production? Why or why not?
Answer:
Yes, entrepreneurship is the driving force because entrepreneurs bring together land, labour, and capital to create goods and services. They take risks, make decisions, and innovate to solve problems. Without entrepreneurship, the other factors remain unused or poorly utilised. However, entrepreneurship needs support like finance, skills, and favourable policies.

Q6. Can technology replace other factors like labour? Is this good or bad? Support your answer with the help of an example.
Answer:
Technology can replace some labour, e.g., machines harvesting crops instead of farmers. This increases efficiency but can reduce jobs. However, technology also creates new opportunities, such as software development or drone operation. Thus, it is both good and bad—good for productivity but challenging for employment unless workers upgrade skills.

Q7. How do education and skill training affect human capital? Can they substitute for each other, or do they complement each other?
Answer:
Education builds knowledge, while skill training develops practical abilities. They complement each other because:

Education provides theory, training provides application.
Both are needed for a productive workforce.
For example, a doctor requires medical education (theory) and hospital training (practice). They cannot substitute for each other.

Q8. Imagine you want to start a business that produces steel water bottles. What kind of inputs are needed? How would you obtain them? Suppose one of the factors is missing; what happens to your business operations?
Answer:
Inputs needed:

Land (factory space),
Labour (skilled workers),
Capital (machines, money),
Entrepreneurship (to organise).

If any factor is missing:

No land → no place for production.
No labour → machines remain unused.
No capital → cannot buy raw materials.
No entrepreneurship → no vision to run the business.
Thus, all factors are interconnected and essential.

Q9. Interview an entrepreneur or founder to understand their motivation to start a business and the opportunities and challenges they saw.
Answer (sample):
I interviewed a bakery owner. She said her motivation was her love for baking and demand for fresh bread in the area. Opportunities included a growing customer base and scope for online delivery. Challenges were lack of funds, rising raw material costs, and competition. Her success came from innovation (unique cakes) and good customer service.

Q10. Think like an economist. Suppose you are Ratna (restaurant owner). How would you handle these situations?

Rent doubles: Shift to a cheaper place or raise prices slightly.
Worker quits: Hire a replacement quickly or distribute tasks temporarily.
Loan for new technology: Invest in modern kitchen equipment to improve quality and efficiency.
New restaurant nearby: Improve service, maintain quality, and innovate with new dishes.
Ease of business laws: Advocate for simpler licensing and lower taxes to help small businesses grow.

Extra Short Answer Questions

Name the four main factors of production.
→ Land, Labour, Capital, Entrepreneurship.
What is human capital?
→ Skills, knowledge, and health of people that make them productive.
Give one example of capital.
→ Machinery in a factory.
Who is called an entrepreneur?
→ A person who takes risks, innovates, and organises factors of production.
Name two facilitators of human capital.
→ Education and healthcare.

🔹 Extra Long Answer Questions

Q1. Explain the interdependence of factors of production with suitable examples.
Answer (150 words):
All factors of production—land, labour, capital, and entrepreneurship—are interdependent. For example, in agriculture, land is required for farming, labour for cultivation, capital for tractors, and entrepreneurship to manage resources. In industries, machines (capital) cannot function without skilled workers (labour). Similarly, an entrepreneur cannot succeed without land, funds, and skilled people. Modern technology further links all these factors by increasing efficiency. If one factor is missing, production suffers. Hence, production is a teamwork of all factors.

Q2. Discuss the role of human capital in production.
Answer (150 words):
Human capital refers to the skills, knowledge, health, and abilities of people. It is the most important factor because it decides how effectively land, labour, and capital are used. For example, skilled farmers produce more from the same land than unskilled ones. Engineers use machines more productively than untrained workers. Education, training, and healthcare improve human capital, making workers efficient. Without healthy and educated people, machines and resources remain underutilised. Thus, human capital drives innovation, productivity, and economic growth.

Q3. “Entrepreneurship is the engine of economic growth.” Justify this statement.
Answer (160 words):
Entrepreneurship is the driving force of production because entrepreneurs take risks and combine land, labour, and capital to produce goods and services. They innovate by creating new products and services that improve people’s lives. For example, J.R.D. Tata built industries in steel, airlines, and automobiles, contributing to India’s development. Entrepreneurs also create jobs, support supply chains, and generate income for society. They promote competition, efficiency, and global trade. Without entrepreneurship, resources remain idle, and economic growth slows. Thus, entrepreneurship acts as the engine of growth.

MCQs

Which is not a factor of production?
(a) Land (b) Labour (c) Capital (d) Money spent in markets
Answer: (d)
Human capital refers to:
(a) Machines (b) Money (c) Skills and knowledge (d) Raw materials
Answer: (c)
Which factor of production is called “nature’s gift”?
(a) Land (b) Labour (c) Capital (d) Entrepreneurship
Answer: (a)
Who among the following is an entrepreneur?
(a) Worker (b) Factory owner (c) Innovator taking risks (d) Engineer only
Answer: (c)
Which of these is physical capital?
(a) Education (b) Healthcare (c) Machines (d) Training
Answer: (c)
Who was the founder of Air India?
(a) Tata Sons (b) J.R.D. Tata (c) Birla (d) Narayana Murthy
Answer: (b)
Which system trains people in specific job skills?
(a) Education (b) Training (c) Culture (d) Motivation
Answer: (b)
Which country applies the concept of kaizen for continuous improvement?
(a) India (b) China (c) Japan (d) Germany
Answer: (c)
Which resource includes soil, forests, and minerals?
(a) Labour (b) Land (c) Capital (d) Entrepreneurship
Answer: (b)
SWAYAM platform is used for:
(a) Banking (b) Online courses (c) Farming (d) Trading
Answer: (b)

Fill in the Blanks

Land, labour, capital, and entrepreneurship are the main factors of production.
Skills, knowledge, and health are part of human capital.
Machines and tools are examples of physical capital.
Entrepreneurs are the risk-takers and organisers.
J.R.D. Tata received the Bharat Ratna in 1992.
The Japanese concept of continuous improvement is called kaizen.
The Great Famine of 1876–78 showed the dangers of poor agricultural systems.
Online courses under the Government are available on SWAYAM.
The Council of Ministers is accountable to the Lok Sabha.
Corporate Social Responsibility (CSR) became mandatory in 2014.

True/False

Land includes natural resources like water, soil, and minerals. ✅
Human capital and physical capital mean the same thing. ❌
Entrepreneurs only work for profit. ❌
Technology can act as a facilitator of production. ✅
SWAYAM is an online education platform. ✅
Capital includes both money and man-made resources. ✅
Kaizen refers to a German work ethic. ❌ (It is Japanese)
India is the world’s largest mobile phone manufacturer. ❌ (Second after China)
CSR requires companies to spend part of their profits on social activities. ✅
A healthy and skilled population increases productivity. ✅

Tag: Chapter 7: Factors of Production