Chap 7 : Factors of Production

The Big Questions

1. What are the factors of production? Answer: The factors of production are the basic things needed to make any goods or provide any service. There are four main factors:

• Land: This includes not just the ground but all natural resources like water, forests, soil, and minerals.
• Labour: This is the physical and mental work done by people, like a farmer working in a field or a teacher teaching in a school.
• Capital: This includes the money, tools, machines, and buildings that are used to produce things. For example, a tractor for a farmer or a computer for a software developer.
• Entrepreneurship: This is the act of starting a business. An entrepreneur is a person who brings all the other factors together, takes risks, and comes up with a new idea to create something valuable.

2. How are these factors interconnected? Answer: The factors of production are all connected and depend on each other, like the different players in a cricket team. An entrepreneur has an idea for a business. They use capital (money) to buy or rent land (a place for a factory or shop). Then, they hire labour (workers) to work on the land using machines (which are also capital) to produce goods or services. If any one of these factors is missing, it’s very difficult to produce anything. For example, you can’t build a factory without land, and you can’t run the machines in the factory without workers.
3. What is the role of human capital in production, and what are its facilitators? Answer: Human capital is the special knowledge, skills, and health that people have, which helps them work better and be more productive. It’s not just about working hard (labour), but about working smart. For example, a doctor who has studied for many years has high human capital and can treat sick people effectively.

The things that help build or facilitate human capital are:

• Education and Training: Going to school and learning new skills makes people more knowledgeable and capable.
• Healthcare: When people are healthy, they can think clearly, work harder, and don’t miss school or their job due to sickness.
• Social and Cultural Influences: A culture that encourages hard work, honesty, and continuous learning helps people become better workers and innovators.

In-Text Questions and Activities

Questions from Page 3

1. In small groups, study the economic activities around your locality. What are the different types of goods and services being made or provided? Answer: In my locality, I can see many economic activities. Here are some of the goods and services being provided:

• Goods:
  • A bakery sells bread, cakes, and biscuits.
  • A tailor shop stitches clothes like shirts and pants.
  • A small furniture shop makes wooden tables and chairs.
• Services:
  • A barber shop provides haircutting services.
  • A doctor’s clinic provides health check-ups and treatment.
  • An auto-rickshaw driver provides transport services.

2. Where do people get the money that they need for their business? Answer: People get the money they need for their business from a few different places:

• Personal Savings: Many people save their own money over time to start a business.
• Family and Friends: They might borrow money from their family members or friends.
• Bank Loans: They can go to a bank and take a loan, which they have to pay back with interest over time.

3. Where did the hairdresser get trained? Answer: A hairdresser might get trained in a few ways. They could have attended a special vocational school or a beauty parlour course to learn haircutting and styling skills. Sometimes, they learn as an apprentice by working under an experienced hairdresser for a few years.
4. Who taught the food vendors to cook? Answer: Food vendors often learn to cook from their family members, like their parents or grandparents, who pass down recipes from one generation to the next. Some might also learn by working in a restaurant or with another food vendor before starting their own stall.
5. What motivated the business owners to start their business? Answer: Business owners are motivated by different things. Some of the common motivations are:

• To earn a living and support their family.
• To be their own boss and not work for someone else.
• They have a special skill (like cooking or tailoring) and want to use it to serve people.
• They see a problem in their area and want to provide a solution (like opening a grocery store where there isn’t one).

Question from Page 4

1. Revisit the table in your report. Which of the items on your list can be labelled as ‘land’? Answer: Based on the sample table in the book, the items that can be labelled as ‘land’ are the natural resources used. For example:

• For a restaurant, the water used for cooking and cleaning is a natural resource.
• For a vegetable vendor, the fresh vegetables and fruits themselves are products of the land (soil).
• For a salon, the water and electricity (which can be generated from water or coal) are natural resources.
• The actual physical space or ground where the shop is located is also considered ‘land’.

Question from Page 6

1. How do infrastructure and healthcare systems like hospitals, primary healthcare centres, doctors, pharmacies, diagnostic labs, etc., contribute to developing human capital? Answer: Good infrastructure and healthcare systems are very important for developing human capital. When people are healthy, they can perform better.

• Hospitals and doctors help treat people when they are sick, so they can get back to work or school quickly.
• Primary healthcare centres provide basic health facilities and vaccinations, which prevent people from falling ill in the first place.
• Pharmacies provide the necessary medicines to cure illnesses.
• When people are healthy, they can attend school regularly, learn better, and be more productive at their jobs. A healthy worker can do more work and come up with new ideas. This makes the country’s workforce stronger and more skilled.

Questions from Page 7

1. Let’s do a small experiment. Make a list of 10 working adults in your family and neighbourhood. Ask them to describe the culture at their workplace. Share notes with your classmates. What did you discover? What are some adjectives that occur more frequently? Answer: After talking to 10 working adults in my neighbourhood, I discovered that workplace cultures can be very different. Some people work in very busy and strict environments, while others have a more relaxed and friendly workplace. The adjectives that occurred most frequently were:

• Helpful: Many people said their colleagues help each other.
• Busy: Almost everyone described their workplace as busy.
• Punctual: Many mentioned that being on time is very important.
• Respectful: People said that everyone is treated with respect.
• Hard-working: This was a common word used to describe the people they work with.

2. In the Tapestry chapters, you have seen examples of the art and architecture in India across several centuries. What do you think are the factors that enabled their creators to achieve such high levels of excellence? Answer: The creators of India’s beautiful art and ancient temples were able to achieve such excellence because of several factors:

• Highly Skilled Labour: The artists and workers (shilpis) had amazing skills that were passed down through generations, from father to son.
• Knowledge and Planning (Human Capital): They had deep knowledge of art, engineering, and architecture written in ancient texts called the shilpa shastras. They planned everything in great detail.
• Dedication and Devotion: For them, their work was a form of worship. They worked with great devotion and patience for many years, sometimes for their entire lives, without even expecting to see the final temple completed.
• Good Quality Materials (Land): They used the best quality stones, wood, and other natural resources available to them.
• Support from Kings (Capital and Entrepreneurship): Kings and rich merchants provided the money (capital) and resources needed to build these magnificent structures. They were the ones who initiated and supported these grand projects.

Questions from Page 8

1. Shivay, a student at Saraswati Vidyalaya in Grade 8, had to drop out of school two years back as his father lost his job. How do you think the loss of schooling years will affect Shivay when he grows up? Answer: The loss of schooling years will create many difficulties for Shivay when he grows up.

• He will have fewer job opportunities because many jobs require at least a basic level of education.
• He might have to take up low-paying jobs that require more physical labour.
• Without education, it will be harder for him to learn new skills, adapt to new technologies, and improve his position in life.
• This affects his human capital, making it difficult for him to earn a good living and have a better future.

2. What problems could businesses face when they do not find workers with the required skills? Answer: If businesses cannot find workers with the right skills, they will face many problems:

• Low Quality Products: The goods they produce might not be of good quality because the workers don’t know how to make them properly.
• Less Production: Work will be slow, and the business won’t be able to produce as much as it wants to.
• Wastage: Unskilled workers might waste raw materials or damage expensive machinery.
• Difficulty in Growing: The business will find it hard to grow, innovate, or compete with other companies that have skilled workers.

3. Are some jobs more important than others? Answer: No, all jobs are important for society to function properly. We might think some jobs like being a doctor or a scientist are more important, but every job has its own value. Each job is like a small part of a big machine. If even one small part stops working, the whole machine can break down.
4. What would happen if nobody cleaned the streets, collected the trash, farmers stopped cultivating the crops, doctors were not available to treat patients, and so on? Answer: If people in these jobs stopped working, our society would collapse.

• If nobody cleaned the streets or collected trash, our cities would become full of garbage. This would lead to the spread of diseases.
• If farmers stopped cultivating crops, there would be no food to eat, and everyone would go hungry.
• If doctors were not available, people would not get treatment for their illnesses, and many would suffer or die. Every job, big or small, plays a crucial role in keeping our lives safe, healthy, and comfortable.

Questions from Page 10

1. Why do you think the use of indigenous techniques has declined? Answer: The use of indigenous (traditional) techniques has declined for several reasons:

• New Technology: Modern machines and new technologies can often make things faster and cheaper than traditional methods. For example, machine-made cloth is produced much faster than handloom cloth.
• Lack of Support: Many traditional arts and crafts did not get enough support or money to continue.
• Changing Tastes: People’s preferences have changed, and they often prefer modern, factory-made goods.
• Skills Not Passed On: The younger generation often chooses to move to cities for different jobs instead of learning the traditional skills of their parents and grandparents.

2. Find out some techniques and products from your region that showcase human effort and skill. Explain briefly using drawings and text in the class. Answer: In my region of Rajasthan, a famous product that showcases amazing human skill is Bandhani or Bandhej.

• What it is: It is a traditional technique of tie-and-dye used to create beautiful patterns on cloth, especially for sarees and turbans.
• How it is made: Skilled artisans, mostly women, take a piece of cloth and tie thousands of tiny knots on it with a thread. The cloth is then dyed in different colours. After dyeing, the knots are opened up. The places where the knots were tied do not catch the colour, creating beautiful designs like dots, squares, and waves.
• Skill Involved: This requires immense patience, precision, and skill because the knots are very small and the patterns are very detailed. It is a beautiful example of human effort passed down through generations.

Question from Page 11

1. Identify a factory in your region. Find out how much capital may have been invested in the construction of the factory (you may provide an estimate). What kinds of equipment does the factory use to create its finished products? Answer: In my region, there is a large biscuit factory.

• Estimated Capital: It is a big factory, so I estimate that a huge amount of capital, maybe many crores of rupees, was invested to build the factory building and buy all the machines.
• Equipment Used: The factory uses many different kinds of equipment to make biscuits. This includes:
  • Large mixers to mix the dough (flour, sugar, butter).
  • Rolling machines to flatten the dough into thin sheets.
  • Cutting machines that cut the dough into biscuit shapes.
  • A very long oven through which the biscuits pass on a conveyor belt to get baked.
  • Cooling conveyors to cool the biscuits after baking.
  • Packaging machines that automatically wrap the biscuits and put them into packets.

Questions from Page 13

1. What could be the lessons for young entrepreneurs that you can gather from the above case (J.R.D. Tata)? Answer: From the life of J.R.D. Tata, young entrepreneurs can learn many important lessons:

• Think Big and Be a Visionary: He didn’t just run a business; he built industries like steel, cars, and even India’s first airline. He had a vision for building a modern India.
• Care for Society: He believed that a business should not just make profit but also help society. This is a very important value.
• Take Care of Your Workers: He was known for providing good working conditions for his employees. A happy team works better.
• Work Hard with Honesty: He was a man of vision, hard work, and honesty. These qualities are key to long-term success.

2. Does the existing knowledge of the entrepreneur help in finding solutions to the problem at hand? Or do they need to seek other sources? Answer: An entrepreneur’s existing knowledge is very helpful, as it gives them a starting point. However, no one knows everything. A good entrepreneur knows that they also need to seek knowledge from other sources. They do this by reading, talking to experts, hiring skilled people, and listening to feedback from customers to find the best solutions.
3. Is profit the only motivation for an entrepreneur? Why or why not? Answer: No, profit is not the only motivation for an entrepreneur, although it is an important one. Many entrepreneurs are also motivated by:

• A desire to solve a problem: They see a need in society and want to create a product or service to help people.
• Passion for their idea: They truly believe in their idea and want to see it become a reality.
• Creating jobs: Many feel happy that their business provides livelihoods for other people.
• A sense of achievement: There is a deep satisfaction in building something successful from scratch.

4. What are the other personality traits required to be a successful entrepreneur? Answer: To be a successful entrepreneur, a person needs several other traits besides being knowledgeable:

• Risk-taker: They must be willing to take calculated risks by investing their time and money.
• Hard-working: Starting and running a business requires a lot of hard work and long hours.
• Persistent: They should not give up easily when they face challenges or failures.
• Creative: They need to think of new ideas and innovative solutions.
• Good Leader: They need to be able to lead and motivate their team.

Questions from Page 16

1. Can you think of some technological advancements that have impacted the lives of people and communities around you? Talk to elders at home and in the neighbourhood about it. Answer: After talking to my elders, I learned about some technological advancements that have greatly impacted our lives:

• Mobile Phones: My grandmother said that when she was young, they had to send letters or go to a PCO booth to make a phone call, which was difficult. Now, with mobile phones, we can talk to anyone, anywhere, anytime.
• Internet and UPI: My father mentioned that earlier, they had to stand in long queues at the bank to transfer money or at the electricity office to pay bills. Now, with UPI apps on our phones, we can do all this in a few seconds from home.
• Television: My grandfather remembers a time when there was only one TV channel. Now, we have hundreds of channels and online streaming services, giving us access to news and entertainment from all over the world.

2. Think of an invention that you would like to make to solve a problem. Write its related information on a piece of paper, such as its name, what it does, and how it works, sketches or drawings of what it would look like, and so on. Discuss with your classmates. Answer:

• Name of Invention: The “Clean-Road Bot”
• What it does: This is a small, smart, solar-powered robot that automatically cleans the streets in a neighbourhood. Its main job is to pick up plastic wrappers, bottles, and other dry waste.
• How it works:
  • It uses solar panels on its top to charge itself during the day.
  • It has cameras and sensors to see the road and identify garbage.
  • It has two robotic arms to pick up the waste and a small bin inside to store it.
  • It uses GPS to map the area and make sure it covers all the streets.
  • When its bin is full, it automatically goes to a designated large garbage bin to empty itself.
• Sketch: The robot would be about the size of a small dustbin on wheels, with a smiling face on its screen to look friendly to children.

Questions from Page 18

1. How are local communities and biodiversity affected by such activities (pollution from factories)? Answer: Pollution from factories severely affects local communities and biodiversity (plants and animals).

• Effect on Local Communities: People living near polluted rivers or lands can get sick. The harmful chemicals can cause skin diseases, breathing problems, and other serious health issues. Their source of drinking water can also get contaminated.
• Effect on Biodiversity: The pollution kills fish and other animals living in the water. It can also poison the soil, making it difficult for plants and trees to grow. This destroys the natural homes of birds and animals in the area, harming the entire ecosystem.

2. Do you also know some places around you that have seen water and land degradation over time? Discuss in class. Answer: Yes, near my city, there used to be a small river. My parents say that the water was once clean, and people used it for various purposes. However, over the years, several factories were built along its banks, and they released their waste into the river. Now, the river has become very polluted. The water is dark and smells bad. The land along the river has also become barren, and not many plants grow there anymore. This is a sad example of water and land degradation.

End of Chapter Questions and Activities

1. 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: The factors of production are different in the following ways:

• Land is a natural resource; it is a gift of nature.
• Labour is the human effort involved in production.
• Capital is a man-made resource, like tools and machines, used in production.
• Entrepreneurship is the human skill of organising all the other three factors and taking the risk to start a business.

Sometimes it is difficult to classify things. For example, a farmer planting seeds is doing labour. The seeds themselves are a product of the land. The tractor he uses is capital. The farmer who owns the farm and decided what to grow is the entrepreneur. It can be confusing because all these factors work so closely together in a single activity.

2. How does human capital differ from physical capital? Answer: Human capital and physical capital are both important for production, but they are very different.

• Physical Capital refers to man-made, non-human things like machines, buildings, tools, and computers. You can touch them, buy them, and sell them.
• Human Capital refers to the knowledge, skills, education, and health of a person. It is inside a person and cannot be sold or separated from them. For example, a doctor’s knowledge is their human capital, while the stethoscope they use is their physical capital.

3. How do you think technology is changing how people develop their skills and knowledge? Answer: Technology is changing how people develop skills and knowledge in many amazing ways:

• Online Learning: People can now learn anything they want from the internet through websites and apps. They can take courses from the best universities in the world while sitting at home.
• Easy Access to Information: With the internet, we can find information on any topic within seconds. This helps us learn new things quickly.
• Skill Development Platforms: There are special online platforms where people can learn job-specific skills like computer programming, digital marketing, or accounting.
• Remote Work and Collaboration: Technology allows people to work for companies in different cities or even different countries, helping them gain new experiences and skills.

4. A skill is something you learn and practice to get better. It helps you do things well, like playing a sport, creative writing, solving math problems, cooking, or even communicating well with people. If you could learn one skill today, what would it be and why? Answer: If I could learn one skill today, it would be computer programming (coding). I would choose this skill because technology is a very important part of our world now. By learning to code, I could create my own websites, apps, or even games. It is a skill that helps in solving problems logically and can be useful in almost any job in the future. It would also allow me to build things that could help other people.
5. Do you think entrepreneurship is the ‘driving force’ of production? Why or why not? Answer: Yes, I think entrepreneurship is the ‘driving force’ of production. Land, labour, and capital are all useful, but they cannot produce anything on their own. They are like parts of a car without a driver. The entrepreneur is the driver who has the idea, brings all the parts (factors) together, starts the engine (invests money), and steers the car (makes decisions) to reach a destination (create a successful business). Without the entrepreneur’s vision and risk-taking ability, no production would take place.
6. Can technology replace other factors like labour? Is this good or bad? Support your answer with the help of an example. Answer: Yes, technology can sometimes replace labour. For example, in a car factory, robots now do the work of welding and painting cars, which was earlier done by many workers.

Whether this is good or bad has two sides:

• Good Side: Using technology can make work faster, more accurate, and safer. Robots can do dangerous jobs, protecting humans from harm. It can also lead to cheaper products for everyone.
• Bad Side: The main drawback is that people can lose their jobs. The workers who were painting cars might find themselves without work.

In the long run, technology often creates new and different kinds of jobs. For example, when computers replaced typewriters, some typists lost their jobs, but many new jobs were created for people who could design software, manage computer networks, and do data entry. So, it is important for people to keep learning new skills to adapt to new technologies.

7. How do education and skill training affect human capital? Can they substitute for each other, or do they complement each other? Answer: Education and skill training are both very important for building human capital.

• Education gives us broad knowledge, helps us understand the world, and teaches us how to think and solve problems. It is the foundation.
• Skill training is more specific. It teaches us how to do a particular job, like how to repair a mobile phone or how to use a particular software.

They complement each other, meaning they work best together. They cannot substitute for each other. For example, a person needs a good education in science to become an engineer. After that, they need specific skill training on how to use engineering software or operate certain machinery. Education provides the ‘why’, and skill training provides the ‘how’. Together, they make a person highly skilled and valuable.

8. 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: To start a business producing steel water bottles, I would need the following inputs (factors of production):

• Land: I would need a piece of land to build a factory. I could either buy it or rent it. I would also need natural resources like water and electricity for the factory.
• Labour: I would need to hire workers, including factory workers to operate machines, designers to design the bottles, and managers to supervise the work. I would find them by advertising job openings.
• Capital: I would need a lot of capital. This includes:
  • Financial Capital (Money): To buy land, machines, and pay salaries. I could use my savings or take a bank loan.
  • Physical Capital: Machines for cutting steel, shaping it into bottles, and painting them. I would buy these from machine manufacturers.
• Entrepreneurship: I would be the entrepreneur, providing the idea, organising all the resources, and taking the risk.

If one of the factors were missing, my business would stop. For example:

• If capital is missing: I cannot buy the machines or pay the workers, so no production can start.
• If labour is missing: I can have a factory and machines, but without workers, no one can operate them to make the bottles.
• If land is missing: I would have no place to set up my factory.

9. Interview an entrepreneur or founder to understand their motivation to start a business and the opportunities and challenges they saw. You can work in pairs to create a questionnaire to collect the information and share what you have learned in a report. Answer:

Part 1: Sample Questionnaire

1. What is the name of your business, and what does it do?
2. What were you doing before you started this business?
3. What was your main motivation to become an entrepreneur?
4. What opportunity or problem did you see that made you start this business?
5. What were the biggest challenges you faced when you were starting?
6. How did you get the money (capital) to start?
7. What is the most enjoyable part of running your own business?
8. What advice would you give to a young student who wants to be an entrepreneur one day?

Part 2: Sample Report

An Interview with Mrs. Anjali Sharma, Founder of ‘Fresh Bakes’ Bakery

We interviewed Mrs. Anjali Sharma, who runs a popular local bakery called ‘Fresh Bakes’. Before starting her bakery two years ago, she was a homemaker.

Her main motivation was her passion for baking. She loved making cakes and cookies for her family and friends, and they always told her she should sell them. The opportunity she saw was that there was no bakery in our neighbourhood that sold fresh, homemade-style cakes without using preservatives.

The biggest challenge she faced was getting the initial money to rent a shop and buy a big oven. She used her personal savings and also took a small loan from a family member. Another challenge was managing everything on her own in the beginning, from baking to selling to managing accounts.

Mrs. Sharma said the most enjoyable part of her job is seeing the happy faces of customers, especially children, when they eat her cakes. Her advice for young entrepreneurs is to “start small, believe in your product, and never be afraid of hard work.”

10. Think like an economist. Let’s explore what happens when things change. If you were Ratna, what would you do in the following situations? Discuss with your classmates.
11. Suppose the rent for your space suddenly doubles. Will you raise the price of the food served to cover the costs? Will you look for a cheaper location? How does this affect your business? Answer: If the rent doubles, my costs will increase a lot. I have two choices. I could slightly raise the price of my food to cover the extra cost, but I have to be careful not to make it so expensive that my customers stop coming. My other option is to start looking for a new, cheaper location. This would be difficult and might cause me to lose some of my regular customers. Both options are risky for my business.
12. Imagine one of your helpers quits suddenly. Can the remaining workers manage the same amount of work? Will you need to offer a higher salary to attract a new worker? Answer: If a helper quits, the remaining workers will have to do more work, which might make them tired and slow down the service. It would be difficult for them to manage the same amount of work, and the quality might suffer. To find a new worker quickly, I might have to offer a slightly higher salary to attract someone good.

III. You receive a small loan to invest in better technology for your restaurant. Will this increase the production or improve quality? Will it help you reach more customers? Answer: A loan for better technology would be great! I could buy a better oven that bakes food faster and more evenly. This would increase production and also improve quality. I could also use some money to partner with online food delivery apps. This would definitely help me reach more customers who live far away and cannot visit my restaurant.

1. Suppose another restaurant opens in the neighbourhood. How will you attract and keep your customers? Will you improve your service, reduce prices, or offer something new? Answer: If a new competitor opens, I must work hard to keep my customers. I would focus on a few things:

• I would improve my service to make sure every customer feels special.
• Instead of just reducing prices, I would offer something new, like a special “Dish of the Day” or a loyalty program where regular customers get a discount.
• I would make sure the quality and taste of my food remain the best in the area.

1. What government laws or rules should be changed to improve the ease of doing business? Answer: To make it easier for small businesses like mine, the government could simplify the process of getting licenses. Instead of having to go to many different offices, there could be a single online portal to apply for everything. Also, making it easier and faster for small businesses to get loans from banks would be a big help.