Economics is the study of social behavior guiding in the allocation of scarce resources to meet the unlimited needs and desires of the individual members of a given society. Economics seeks to understand how those individuals interact within the social structure to address key questions about the production and exchange of goods and services. First, how are individual needs and desires communicated such that the correct mix of goods and services become available? Second, how does a society provide the incentives for these individuals to participate in the production these goods? Third, how is production organized such that maximum-possible quantities are made available given existing resources and production technology? Finally, given that these individuals are at one time involved in the production process and at other times seeking to acquire the goods that have been produced, how are trading rules and exchange agreements established?
The above questions stress the importance of understanding the process of production. The goal here is to understand the basic features of production without getting mired in great technical detail. This is accomplished by developing a simple model that maintains the important features of what are, otherwise complex, engineering relationships. Production is about the conversion of scarce resources into desired goods and services. These resources are often referred to as the factors of production -- a short list that includes:
Land (acreage and raw materials)
Labor (unskilled, semiskilled, professional)
Capital (machines, factories, transportation equipment, and infrastructure) and Entrepreneurship (organizing the other factors of production and risk-taking) This list is brief and yet complete intended to provide sufficient detail to model the input choices available to the producer. Accordingly, the combination of Land, Labor, Capital, and Entrepreneurship will lead to the production of Apples, Wheat, Automobiles, Houses,...
Please join StudyMode to read the full document