Economic Analysis

Economic Analysis



Economics - Analysis

Part 1)

The Factors of Production in an Economy

The location of the firms and industries is influenced by different variables these are aggregation of firms. The main factors of productions which shape the location of firms include labor, land, capital and entrepreneurship. These are the input for the production of goods and services through which firms generate economic profits. Firms need resources for the production of goods and services. As we know the resources to produce a product, are scare comparative to the needs and wants of the people and business that are infinite. Hence, their efficient use is essential in order to maximize the output.

Labor

The physical and mental efforts of the human required for the production of goods and services. These are termed as labor which is the essential part of any firms especially at the national, regional and global scales. However, the physical exertion of the factory worker and farmhands are associated with labor along with the mental exertion of supervisors and executives. Hence, when hiring a labor, the decision is made by examining geography of labor availability, skills and productivity. The point, at which firms depend on labor, yet varies among different economy sectors and even among diverse firms that might espouse diverse techniques of production.

However, the existence of labor issue has always been in economy. This is because of the supply of labor which differs from region to the region and directly effects on the costs. In countries where birth rate are high, the supply tends to be high and labor cost are low as compared to those countries where birth rate is high and result in the high cost and low supply of labor. Hence, rather than hiring their own country people, firms have been outsourcing the labor from different countries where labor cost is relatively low. Moreover, firms' first priority based on the age, sex and the demographic which determine the supply of labor. However, when labor supply is limited to the outsourcing then the cost might increase. It is the only input factors that oppose the conditions of exploitation i.e. strike, unionize or slowdowns or sabotage. These things ultimately affect the productivity level of the firms (Stigler, G. W, 1945, pp. 303).

Land

Land is the natural resource which is used to produce a product or services. The land cost is shaped by its accessibility. The cost of transportation influences the rent of location. However, in most cities, the cost of land reduces, making low cost land. Nevertheless, in some cities it does not happen in the same way. Most crucial thing is to see the tradeoff between the land and the cost of transportation, so that the firm can maximize their profit and reduces their expenses. Accessibility of land i.e. labors incentive in order to maximize their accessibility to labor and urban services rather than paying high rents near the city centre (Stutz, & Warf, 2005, pp. 76).

Capital

The resources used to produce goods and services require capital ...