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Which factor of production is described as a free gift of nature whose total supply for the economy is perfectly inelastic?
ALand
BLabour
CCapital
DEntrepreneur
Answer & Solution
Correct answer: A. Land
1. Land refers to all free gifts of nature and requires no human effort to be made available.
2. Its total supply for the economy is fixed and so is perfectly inelastic.
3. Therefore the factor is land.
4. Labour and capital are not free gifts of nature, and the entrepreneur organises the other factors rather than being a natural resource.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit I "Theory of Production", p.4_
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