Factors of Production – The elements that combine in the production process: land, labour, capital and entrepreneurship/enterprise

The four factors of production are essential for creating goods. To help remember these four factors of production we have two mnemonics as follows: 

Using an acronym:

Think in terms of factory production in a prison cell.

Using a picture mnemonic:

The farm labourer (labour) entered a prize (enterprise) draw and pulled out a sheet that said in great big capital (capital) letters, "YOU HAVE WON AN ISLAND" (land).

The four factors of production are interrelated. Basic examples include the fact that land can be used to produce crops, which then can be used to feed workers (labour). Labour can be used to produce goods. Goods when sold builds capital, which can be used to buy more land and build factories which can then employ more workers, producing more products and building more capital. Entrepreneurship can be used to plan and combine the other factors of production in new and innovative ways.

The four factors of production are a fundamental concept in economics. By understanding the four factors of production, you can better understand how businesses operate and how economic growth occurs.