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Sunday, September 06, 2020


Bachelor’s Degree Programme (BDP)
ASSIGNMENT (2019-20)
Elective Course in Commerce
ECO – 06: Economic Theory
For July 2019 and January 2020 admission cycle

School of Management Studies
Indira Gandhi National Open University
Maidan Garhi, New Delhi -110068
Elective Course in Commerce
ECO – 06: Economic Theory
Dear Students,
As explained in the Programme Guide, you have to do one Tutor Marked Assignment in this Course.
Assignment is given 30% weightage in the final assessment. To be eligible to appear in the Term-end examination, it is compulsory for you to submit the assignment as per the schedule. Before attempting the assignments, you should carefully read the instructions given in the Programme Guide.
This assignment is valid for two admission cycles (July 2019 and January 2020). The validity is given below:
1)         Those who are enrolled in July 2019, it is valid up to June 2020.
2)         Those who are enrolled in January 2020, it is valid up to December 2020.
You have to submit the assignment of all the courses to The Coordinator of your Study Centre. For appearing in June Term-End Examination, you must submit assignment to the Coordinator of your study centre latest by 15th March. Similarly for appearing in December Term-End Examination, you must submit assignments to the Coordinator of your study centre latest by 15th September.

Course Code : ECO - 06
Course Title : Economic Theory
Assignment Code : ECO - 06/TMA/2019-20
Coverage : All Blocks
Maximum Marks: 100
Attempt all the questions
1. What do you understand by factors of production? Briefly explain each of the four main factors.        (20)
Ans.:- Factors of production is an economic term that describes the inputs used in the production of goods or services in order to make an economic profit. These include any resource needed for the creation of a good or service.
Factors of production are the inputs needed for the creation of a good or service. The factors of production include land, labor, entrepreneurship and capital.
The four factors of production are inputs used in various combinations for the production of goods and service to make an economic profit. The factors of production are land, labor, capital and entrepreneurship.
They are the inputs needed for supply. Mainly, the factors of production consist any resource that is used in the creation of a good or service.
Since these factors are limited by nature, and human wants are unlimited, we, as a country, face a decision over the efficient allocation of these scarce resources or factors of production.
Sometimes the type of economic system decides the ownership of the factors of production. For example, in a Capitalist economy, the factors of production are owned by individuals who use them for their own profit.
Four Factors of Production:-
1. Land/Natural Resources:- Land refers to all natural resources. These resources are gifts that are given by nature. Some typical examples of natural resources are water, oil, copper, natural gas, coal, and forests.
These resources can be renewable, such as forests, or nonrenewable such as oil or natural gas. The income earned from land or other such natural resources is called rent.
2. Labor:- Labor, as a factor of production, involves any human input. The quality of labor depends on the workforce’s skills, education, and motivation. Generally speaking, the higher the quality of labor, the more productive is the workforce.
If someone has ever paid you for a job, you have contributed labor resources to the production of goods or services. Labor can be physical or mental. The income earned by labor resources is called wages. It is the largest source of income for most people.
3. Capital:- Here capital refers to manufactured resources such as factories and machines. These are man-made goods used in the production of other goods. Their use in commercial production is what separates them from consumer goods.
Some other examples of capital include hammers, forklifts, conveyor belts, computers, and delivery vans. An increase in capital goods means an increase in the productive capacity of the economy.
The income earned by owners of capital resources is interest.
4. Entrepreneurship:-  An entrepreneur is someone who takes on the risk and brings the other three factors of production together. Entrepreneurs are a vital engine of economic growth, helping to build some of the largest firms in the world as well as some of the small businesses in your neighborhood.
The payment an entrepreneur receives is called profit as a reward for the risk they take.

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