The aim of production is to produce the goods and services that we want. There are four requirements for production of goods and services. Every production is organised by combining land, labour, physical capital and human capital, which are known as factors of production. The first requirement is land, and other natural resources such as water, forests, minerals etc. The second requirement is labour, i.e. people who will do the work. Some production activities require highly educated workers to perform the necessary tasks. Other activities require workers who can do manual work. Each worker is providing the labour necessary for production. The third requirement is physical capital, i.e. the variety of inputs required at every stage during production. What are the items that come under physical capital? Tools, machines, buildings can be used in production over many years, and are called fixed capital. Production requires a variety of raw materials such as the yarn used by the weaver and the clay used by the potter. Also, some money is always required during production to make payments and buy other necessary items. Raw materials and money in hand are called working capital. Unlike tools, machines and buildings, these are used up in production. There is a fourth requirement too. You will need knowledge and enterprise to be able to put together land, labour and physical capital and produce an output either to use yourself or to sell in the market. This these days is called human capital. Investment in human capital (through education, training, medical care) yields a return just like investment in physical capital. This can be seen directly in the form of higher incomes earned because of higher productivity of the more educated or the better trained persons, as well as the higher productivity of healthier people.