LAND:
In its simplest form, land is the physical place where economic activity takes place. However, land also includes all the natural resources found on it. Resources can include wood, water, oil, animals, etc. Land plays an important part in production because land itself and the resources on it are usually limited. Political regulations prevent a person from just going and claiming something for themselves, or there may not be enough for everyone to have. Also, many of the natural resources are nonrenewable, meaning that their amount is fixed, and they can't be used indefinitely. Thus, producers must carefully manage land and its resources.
LABOR:
It seems obvious, but things can't be produced unless someone makes them. Â Therefore, another important factor of production is labor. Labor represents all of the people that are available to transform resources into goods or services that can be purchased. This factor is somewhat flexible since different people can be allocated to produce different things. Nobody has to produce everything themselves. That would be impractical. It's also important that a labor force is well educated and well trained to ensure that they can produce goods at peak efficiency and quality.
CAPITAL:
Both of these things - money and equipment - are considered capital. More specifically, capital can be the money that companies use to buy resources, as well as the physical assets companies use when producing goods or services, such as factories and machinery. Capital is an important factor of production because it's what allows labor and land to be purchased. Steady streams of capital are often required in order to keep a business going.
ENTREPRENEURSHIP:
An entrepreneur is a person who combines the other factors of production - land, labor, and capital - to earn a profit. The most successful entrepreneurs are innovators who find new ways produce goods and services or who develop new goods and services to bring to market. Without the entrepreneur combining land, labor, and capital in new ways, many of the innovations we see around us would not exist. 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. Entrepreneurs thrive in economies where they have the freedom to start businesses and buy resources freely. The payment to entrepreneurship is profit.
