Explain the following terms used in agricultural production: (a) hired labour; (b) fixed capital; (c) working capital; (d) management.
(a) Hired labour is the labour from outside the farmer's family. Such labour is normally paid for as the work done in the farm. It is common where a farmer has a large farm size e.g. commercial farms where hired labour is engaged on either a permanent or time rate basis. Hired labour can be skilled or unskilled labour and it is always scarce and very expensive.
(b). Fixed capital is also known as durable capital. It lasts longer than one production season i.e it cannot be consumed in. the course of one production. It includes all items which have more than one year of useful life, e.g. .buildings, machinery, equipment and dams. It is usually subject to depreciation as a result of the wear and tear of the item due to continued use. The size of the fixed capital is an indicator of the scale of production on the farm.
(c) Working capital is also known as circulating or variable capital. It includes cash to pay for hired labour, seeds, fertilizers, feeds and fuel. This type of capital is used up within the season and it has to be replaced every season. It is the difference between total current assets and total current liabilities. It also determines the scale of operation on the farm.
(d) Management is the mental energy used in production. It involves the effective combination of the other three factors of production i.e. capital, labour and land for maximum output. It is a form of skilled labour. It involves the management of the organisation and operation of its affairs to achieve some predetermined goals. It is a special skill which is usually acquired through a process of learning and training. Good management involves setting objectives, decision making, implementation, control and evaluation. Management arranges for the provision of finance for under-taking production and expansion.
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