Economic Fundamentals: Identify The Factors Of Production

1.1 Economic Fundamentals: Identify the factors of production and discuss their importance as the bedrock of the theory of the firm.
The factors of production are the inputs used to manufacture products and provide services. These inputs include labor, land, and capital. The theory of the firm is a microeconomic model referring to businesses and corporations and how those entities exist to make profits. Firms interact directly with the market to determine the demand for their goods so they can define the price consumers are willing to pay. Referring to the circular-flow diagram model we can see how households and firms are interdependent. Firms use the factors of production to produce products that households consume. Households provide the
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What economic system best describes the US economy and why?
The capitalist economic system emphasizes individual ownership over the factors of production. Individuals own and control land, property and businesses, not the government. These private firms decide what and how much to manufacture. In a socialist economy, the government owns the factors of production and delegates their distribution. Socialist economies are focused on distribution of resources and wealth to maintain fairness and to promote equality. The US economy is capitalist. In the US people have the right to compete freely with minimal government interference. We believe that supply and demand will determine the price to sell products and the prices will be kept low because consumers will look for the best product at the best price. The US believes that capitalism creates an efficient use of resources which will produce the products needed because the market will fluctuate according to the demand. Some people may argue that our country is more of a mixed economy because the government will step in and prevent monopolies, which is one company controlling a market. This is done to promote competition and insure that one firm does not use up all available resources and inflate prices. The US believes that government managed economies cannot efficiently allocate
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I believe each of these parts are required to best define economics. Most people realize that life is not black and white so when making decisions they usually fall in a spectrum of gray. As we look at economic systems we have to think of the resources at our disposal and how to best use them. The third principle, rational people thinking at the margin means making small incremental changes to propel forward. Right now, we have several natural disasters that have devastated major parts of the United States. Using the principle of thinking at the margins, the government can make small changes in allocation of resources to best provide for its citizens. An example is there are three major areas hit by hurricanes, Texas, Florida and Puerto Rico. They all need massive amount of resource, just not the same ones. By shifting first responders out of Texas and sending them to Puerto Rico, they can make a change where the resource is maximized. The shifting of first responders open up the opportunity for other organizations to start aiding in the rebuilding process in Texas while Puerto Rico can begin to set up military hospitals and emergency

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