Saturday, April 23, 2011

What are the three categories of resource constraints?

Strictly speaking, the resource constraints faced by a firm producing a product will vary according to the production technology. Making cars is very different from making sandwiches, and the two types of production will be subject to quite different resource constraints.

But usually when thinking in terms of an individual firm, the three resources we are concerned about are capital, the machines that make the goods, labor, the people that run the machines, and raw materials, the ingredients that are fed into the machines that the goods get made out of. Different industries will require different amounts of each of these resources (compared to sandwiches, cars require much more capital and raw materials, but thanks to robots, proportionally not as much labor). In the short run, one or more resources is fixed, which constrains how much can be produced and often requires operating at less than optimal efficiency.

Another common resource constraint of many forms of production is land, or more generally natural resources; and finally sometimes you'll see financial capital listed as a resource, though really money is sufficiently different from other "resources" that it should probably be handled separately. Money can be made out of thin air; people and machines cannot.

No comments:

Post a Comment

find square roots of -1+2i

We have to find the square root of `-1+2i` i.e. `\sqrt{-1+2i}` We will find the square roots of the complex number of the form x+yi , where ...