Factors of Production 8 Social Science Chapter 7 CBSE Notes 2025-26

Everything that is produced in the world—clothes, gadgets, food, or services—depends on the use of certain basic resources. 

These basic resources are known as factors of production. In every economic activity, business owners or entrepreneurs combine different inputs to create goods or provide services for people’s needs and wants.

Factors of Production: Land, Labour, Capital, Entrepreneurship, and Technology Land, labour, capital, and entrepreneurship are the main types of factors of production. These are combined in different ways according to the type of business or service. 

Technology acts as a critical enabler, making it possible to produce more with the same or fewer resources, and increasing the efficiency of the entire production process.

Land as a Factor In economics, ‘land’ means all natural resources, not just soil or space. This includes forests, water, air, sunlight, minerals, oil, and natural gas. 

Businesses might buy land or use it by paying rent. For example, a restaurant needs land for the building, and farmers need fields for crops.

Labour and Human Capital Labour is the physical and mental effort needed to produce goods and services. People like farmers, teachers, engineers, shopkeepers, and doctors all contribute their work in different ways. 

The term ‘human capital’ refers to the knowledge, skills, experiences, and abilities that people bring to their jobs. Human capital is increased through education, training, and healthcare.

Education gives individuals the knowledge they need, both in general subjects and in specialised skills for specific jobs. Training provides hands-on skills, such as civil engineering students learning directly on construction sites. 

Healthcare is also important because healthy people can work more efficiently. Social and cultural values—such as punctuality and a focus on improvement—also help in creating high-quality human capital.

• Education and training build specialised knowledge and skills.
• Good health allows people to work more effectively.
• A positive work culture encourages dedication and excellence.

Challenges to Human Capital Despite progress, India faces challenges in improving human capital. According to the World Bank, India's adult literacy rate is 85% for males and 70% for females (2023 data). 

Many children and young adults still miss out on education due to economic pressures, affecting their future opportunities. There is also a shortage of skilled labour in some areas, which creates problems for businesses in finding the right talent.

India, however, has a young population—about 65% of people are under 35 years old (Economic Survey, 2024). This demographic dividend is an opportunity for growth, but only if there is investment in education, health, training, and skill development for all.

India’s Heritage of Skills and Knowledge India has a rich tradition of skill-based knowledge. In ancient times, art and knowledge were combined to create excellent sculptures, buildings, ships, and crafts. 

Skills and techniques were passed down through generations or described in texts like the Shilpa Shastras. For example, ancient Indians built stitched ships by sewing wooden planks, a technology over 2,000 years old, used for trade across the Indian Ocean.

Many traditional techniques have now declined due to changes in technology and new methods. However, the pursuit of perfection, excellence, and dedication in work are still important values.

Capital: Money and Tools Capital includes money as well as durable assets such as machinery, equipment, vehicles, computers, factories, and shops. These are needed for daily business operations. 

Entrepreneurs may use personal savings or borrow from friends and banks to get started. Larger companies might raise money through the stock market by selling shares to the public, and investors receive dividends as a share of the profit. When borrowing from banks, businesses pay interest on loans.

• Capital includes both money and tools/machines used in production.
• Businesses often rely on loans or investments to buy capital goods.

Entrepreneurship: The Driving Force Entrepreneurship means starting something new—usually a business—to solve a problem or supply a need. 

Entrepreneurs come up with ideas, organize the other three factors (land, labour, capital), take risks, make key decisions, and work hard to bring new products or services to the market. They not only seek profit, but often also want to make a positive impact in society. J.R.D. Tata is one example of an entrepreneur who helped build Indian industry and introduced progressive practices.

• Entrepreneurs combine land, labour and capital to produce goods and services.
• They drive innovation and create jobs.
• They take risks and make important decisions for their businesses.

Technology: Improving Production Technology means using scientific knowledge for practical purposes in production. From simple tools like wheelbarrows and pulleys to modern tools like drones and computers, technology increases efficiency and output. 

Today, technology enables online learning, access to jobs (via portals), better coordination, and easier transactions. Importantly, not all new technologies replace old ones—often, both are used together.

Technology also makes it easier to learn and develop new skills or find job opportunities, which helps both workers and employers.

How Factors are Connected The mix of land, labour, capital, entrepreneurship, and technology varies across industries. For example, handicrafts and agriculture are labour-intensive, while chip manufacturing requires more capital and technology. 

All these factors need to work together for efficient production—if one is missing or misused, it affects the output. Sometimes, factors are sourced from different places, requiring coordination (for example, in mobile phone manufacturing, which has a complex supply chain).

Responsibilities Towards Factors of Production Using factors of production also brings responsibility. Natural resources must be used wisely to avoid environmental damage; this can include recycling wastewater, using recycled materials, and minimizing pollution. 

Businesses also have a duty to treat workers fairly, provide training, ensure safe working conditions, and prevent discrimination. In India, companies with substantial profits must spend at least 2% on corporate social responsibility (CSR) projects to address environmental and social issues.

• Sustainable production ensures resources are available for future generations.
• CSR helps businesses address their responsibilities to people and the environment.

Key Points to Remember

• Land, labour, capital and entrepreneurship are vital and must be used together for production.
• Human capital depends on education, health, technology, and culture.
• Resources must be used wisely to benefit society and protect the environment.

CBSE Class 8 Social Science Chapter 7 Notes – Economic Life Around Us: Factors of Production

These Class 8 Social Science Chapter 7 revision notes summarize key topics like land, labour, capital, entrepreneurship, and technology in simple language. Students can quickly review the main points and understand important examples, making exam preparation easier and faster.

The notes cover all essential concepts and recent data, helping learners connect ideas such as human capital and sustainable use of resources. By using these chapter revision notes, students will be better prepared for questions on the factors of production and their role in our economic life.