Macro Economics For downloading this contact- bikashkumar.bk100@gmail.com Prepared by Students of University of Rajshahi MD: ANISUR RAHMAN FARHANA AKTER MD: HASANUZZAMAN RIFATULLAH RIMA AKTER

1. PRODUCTION
 Production is an outcome of an
economic activity.
 Prof. J.R.Hicks defines Production as
"any activity directed towards the
satisfaction of other peoples wants
through exchange."

2. Factors of Production
 Productive resources required to produce a given
product are called factors of production. These
productive resources may be raw materials or
services of the various categories of workers or of
capitalist supplying capital.
 “FRASER” Defined Factors of Production,” as a
group or class of original productive resources”

3. Factors of Production
The term “factor” is used for a
class of productive elements,
the individual member of which
are known as “units” of the
factors

4. 4
Resources/Factorsof
Production
Land
Labor
Capital
Enterprise

5. LAND
Land is that factor of production which is
available to us as a free gift of nature. It
include not only the soil but also other free
gift of nature ( like forest, water, natural
resources etc.)

6. Natural Resources
 Fixed in supply
 Cannot be renewed
 Found in nature
 E.g. Oil, water,
marine life, forests etc

7.  Free gift of nature.
 Limited in supply.
 Differ in variety.
 Immobile.
 Passive factor of
production.
 Alternative uses.
 Indestructible.
CHARACTERISTICS OF LAND

8. Labour
is an exertion of physical and
mental efforts of individuals

9. LABOUR
 Any work, whether manual or mental, which is
undertaken for a monetary consideration is called
labour.
 According to Marshal world, “Any exertion of mind
or body undergone partly or wholly with a view to
some good other than the pleasure derived directly
from the work, is called labour”

10. Characteristics of labour
 Labour is inseparable from the labourer himself.
 Labour sell to his labour in person.
 Labour does not last, it is perishable.
 Labour has a very weak bargaining power.
 Changes in the price of labour react rather curiously
on its supply.
 There can be no rapid adjustment of the supply of
labour to demand for it, because supply can’t be
increased quickly, nor can it be reduced.

11. DIVISION OF LABOUR
• This means division of society into major
occupation.Simple
• In this case, no group of workers make a complete
article. Instead, the making of an article is split up
into a number of processes and sub processes and
each process or sub process is carried out by a
separate group of people.
Complex
• This types of division refers to certain localities,
cities or towns specialising in the production of
some commodity. This is also called localisation of
industries .
Territorial

12. Advantages of Division of labour
 Increasing Productivity,
 Increase in dexterity and skill,
 Invention are facilitated.
 Introduction of Machinery Facilitated.
 Saving of Time,
 Saving in tools and Implements,
 Diversity Of Employment,
 Large-scale Production and
 Right Man To Right Place

13. Disadvantages of Division of Labour
 Monotony
 Retards Human Development,
 Loss of Skill,
 Industry De-humanised,
 Risk of Unemployment,
 Disrupts of Family life,
 Division of Labour and Evils of the Factory system,

14. Division of labour is limited by the
extent of the market
 This is so obvious. If for instance, a shoemaker is
able to dispose of one pair of shoes in six months, it
will look foolish for him to employ half a dozen
persons on the making of soles, half a dozen on the
making of uppers and another six person in joining
them. There must be adequate demand for his
product before he can adopt such method. Division
of labour implies large-scale production, and it is
meaningless to produce more in the absence of a
sufficient market for goods. The limiting factors for
the introduction and the extension of labour is,
therefore, the existence of a wide market

15. Market also depend on division of
labour
 Under division of labour, production is done on a
large scale, which means cheaper production. When
goods are cheap, more people will buy them . Thus
the boundaries of the market extended by the
division of labour.
 Hence, division of labour and division of market are
interdependent. But it is more true to say that
division of labour is limited by the extent of market
than the extent of the market depends on division of
labour.

16. Territorial Division of Labour
 Territorial division of labour is also called the
localisation industries. By localisation we mean the
establishment of an industry in a certain place or a
region. A certain town or a territory comes to
specialise in a certain industry.
 Example: Indian jute industry entered into bengal,
iron and steel industry in Bihar, sugar industry in
U.P. and Bihar cotton mill industry in Bombay etc.

17. Causes of Localisation
 Nearness to Raw-materials;
 Nearness to sources of power;
 Proximity to market;
 Availability of Labour;
 Availability of capital;
 Political Factor;
 Religious Factor;
 Momentum of an Early Start;

18. Consequences of Localisation
 Availability of labour, capital, raw material etc.
 Benefit of specialised transport, subsidiary
industries, technical journals, association etc.
 Ample opportunities for exchange of ideas;
 Quality can be improved, costs lowered and
common problems thoroughly thrashed and
successfully solved..

19. 1) Capital is a man-made resource of production used to produce
further wealth.
2) It refers to the stock of capital assets such as factories,machines,
tools & equipments, raw material, transport vehicles etc…
3) Therefore capital is defined as “Produced means of production”

20. Capital
In Book-Keeping, Capital means amount invested by
businessman in the business.
In commerce subjects like O.C & S.P, Capital means
finance or company's capital.
But, in economics, Capital is that part of wealth which
is used for production.

21.  Man made
factor.
 Mobile and
transferable.
 Depreciates.
 Passive factor of
production.
Characteristics of Capital

22. Is land capital?
Land is not regarded as Capital. Because
a. Land is a free gift of nature but capital is man-
made or is a ‘produced’ agent of production
b. Capital is perishable, whereas land is indestructible
and permanent.
c. Capital is mobile but land has no mobility.
d. The amount of capital is increased but the quantity
of land is fixed and limited.

23. Formation of capital
 Capital formation means the increase in the stock of real
capital in a country .
 There are many ways of forming capital
1.
(a) Creation of saving
(b) Mobilisation of Saving
(c)Investment of savings in real capital
2.Foreign Capital
(a) Foreign direct investment
(b)Foreign institutional investment
3.Deficit financing
4. Disguised unemployment

24. ENTERPRIZE
 The fourth factor of production is enterprize
which is supplied by the Entrepreneur.

25. 1) Entreprenuer is a person who brings in land,
labour & capital in one place & uses it for the
production process.
2) He is the person who decides-
a) What to produce?
b) How to produce?
c) Where to produce?
3) The person who takes these decisions along
with the risk associated with them is known as
‘Entreprenuer’.
Entreprenuer

26. ENTREPRENEUR
He starts the work, organises and supervises it. He
undertakes to remunerate all the factors of
production: to pay rent to landlord, interest on the
borrowed capital, and wages to labour, and pays
them in advance of sale of goods. He takes the
final responsibility of the business.
The entrepreneur is the innovator .

27. 1) He must be a good
administrator.
2) He must possess complete
knowledge.
3) He must be a person of
imagination.
4) He must be a man of action.

28. Schumpeter’s Concepts of
Entrepreneur
 The Entrepreneur is one who combines the four factor of
production and carry out the production process . He is
just not investor but also one who can be a manager.
 He introduces five types of innovations:
i. Introduction of new product
ii. Introduction of new machine
iii. Discovery of a new source of supply of raw materials
iv. Opening up of a new market
v. Introduction of scientific methods of organisation

29. Schumpeter’s Concepts of
Entrepreneur
As a leader an entrepreneur posses the following
motives , whose main aim is not only to earn profit
but also
i. Desire to establish private commercial kingdom.
ii. Will to conquer and prove superiority over others.
iii. Joy of creation and getting things done .

30.  Brings all the factors of production together in a profitable way
 Characteristics of an
entrepreneur
Trustworthy
Enthusiastic
Risk taker
Professional
Honest
Hard working
Energetic
Passionate
Entrepreneurship