about production require individual agents
to make decisions about
and use of physical
the objectives are often pecuniary, it is often necessary to relate
the decisions about the physical units
of inputs and outputs to the
costs of production.
- If the prices of the inputs and the production relationships are known (or understood ), it is possible to calculate or estimate all the cost relationships for each level of output.
, the decision
maker will probably have partial
information about some of the costs and will need to estimate
production relationships in order
to make decisions about the
relative amounts of the different
inputs to be used.
is an activity
where resources are altered or changed and there
is an increase
in the ability
of these resources to satisfy wants.
- the technology used in the production of a good (or service )
- the prices of the inputs determine the cost of production.
processes increase the ability of inputs (or resources) to satisfy
- a change in physical characteristics
- a change in location
- a change in time
- a change in ownership
its most simplistic level, the economy
is a social process
allocates relatively scarce resources to satisfy relatively unlimited
achieve this objective
, inputs or resources must be allocated to
those uses that have the greatest value
or buyers wish
to maximize their utility or satisfaction given
- their incomes,
- the prices of the goods they may buy.
of the buyers or consumers is expressed in the demand
function. In a market setting, this is achieved by buyers (consumers)
) interacting. The producers and/or sellers
may be either an objective
As an objective
a producer may seek