Supply of Factors of Production

Supply of factor of production such as land, labour and capital can be analysed from two angles:

• The total factor supply, the supply of factors to the economy as a whole which means supply to all firms, all industries or all economic activities taking place in the economy.
• The supply of factors for a particular use such as anyone firm or any one industry. The essential point here is that one firm or industry can draw factors for its own use by bidding away them for other firms and industries by offering them higher prices or other incentives.