Read the following statements - Assertion (A) and Reason (R):
Assertion (A): Production is the outcome of the combined efforts of two inputs, namely land and labour.
Reason (R): Factors of production are paid for their services, so income is generated in the production process.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) is false but (R) is true.
A names only two inputs, but production uses four factors: land, labour, capital and entrepreneurship. So A is false. R is true.
Assertion (A): Production is the outcome of the combined efforts of two inputs, namely land and labour. — False. Production needs four kinds of contributions: labour, capital, entrepreneurship and land.
Reason (R): Factors of production are paid for their services, so income is generated in the production process. — True. Each factor earns a payment (wage, interest, profit or rent), so income is generated in production.
NCERT (2026-27): “2.2 Circular Flow of Income and Methods of Calculating National Income … As we have mentioned before, there may fundamentally be four kinds of contributions that can be made during the production of goods and services (a) contribution made by human labour, remuneration for which is called wage (b) contribution made by capital, remuneration for which is called interest (c) contribution made by entrepreneurship, remuneration of which is profit (d) contribution made by fixed natural resources (called ‘land’), remuneration for which is called rent. …” “2.2.1 The Product or Value Added Method … The value added of a firm is distributed among its four factors of production, namely, labour, capital, entrepreneurship and land. Therefore wages, interest, profits and rents paid out by the firm must add up to the value added of the firm. …” |