Resources are the foundation of the economy. Today, labor comes to the fore as a factor of production. Demand for a resource depends on how it can be used. The price for it is also important. However, economic laws also apply here. The price of demand for resources is an increase in its value in the market. If it grows too fast, then no one else will want to buy them. Therefore, the balance due to the intersection of supply and demand curves is so important.
Basic concepts
By production in the economy is understood any activity of people associated with the use of resources. Nature cannot give man everything that is necessary, so he has to invent the missing. Thus, the demand for a resource depends on which products are made from them. The more valuable they are, the more it will be. Economic resources are a combination of natural, social and spiritual forces used in the process of creating goods, providing services and producing any other values.
Types and factors
Consumer demand is shaped by price and resource productivity. To simplify research, the latter are usually divided into four groups:
- Natural. This group includes natural forces and substances that can be used in production. Speaking about natural resources as factors of production, economists often mean only land in their research. The price for its use is called rent. It is important to control the use of primarily exhaustible resources.
- Material. This group includes everything that is created by human hands. They are not only used in the production of goods and services, but they themselves are the result of the production process.
- Labor. This type of resource is the social capital of a country or region. They are usually evaluated by three parameters: socio-demographic, qualifying, and cultural and educational.
These three types are classified as basic resources. Derivatives include finance. You need to understand how production factors differ from resources. The latter concept is much broader in scope. Factors are resources that are already involved in the production process. These include:
- The earth. In a number of sectors, for example, agricultural, this factor acts not only as a means of labor, but also as its subject. Also, land can act as an object of ownership.
- Capital. This factor includes all material and financial resources used in production.
- Work. This factor is understood as the part of the population that is engaged in production.
Sometimes, entrepreneurial abilities are singled out separately , since it is from them that the effectiveness of the national economy as a whole and of individual economic entities depends.
Economic assessment
A key research issue is resource analysis. In the course of an economic assessment, the quality of the factors of production, the profitability or loss-making of their application in the production process are correlated. The analysis also takes into account the patterns of spatial distribution of resources. Researchers evaluate the estimated cost-effectiveness of their application. As for natural resources, that is how scientists decide which field to start developing first. Depending on the availability of certain factors necessary in the production, consumer demand for them is formed.
Limited resources
Everyone understands the possibility of failure of one or another factor. It can be easily estimated, so it is considered an objective fact. Distinguish between absolute or relative insufficiency of resources. The first concept implies a set of factors that are needed to meet the needs of the whole society. If resources are sufficient for a specific narrow sphere, then insufficiency is considered relative. It is this situation that is real. For the production of goods A, it is necessary to reduce the output of product B. The choice of the best option is limited by the number of options on the production curve is possible.
Demand for economic resources
In the production process, such natural, material and labor factors are used. They are considered basic. The following determinants of the formation of demand for a resource are distinguished:
- The marginal product of the factor of production.
- The elasticity of demand for an economic resource.
Marginal productivity
Demand for a resource depends on how it can be used in the process of releasing goods and services and what is the effect of its use. Marginal utility depends on what kind of product growth is observed from the application of each new additional unit. In the short term, this indicator first increases, and then begins to decline. In conditions of perfect competition, the cost of a resource is the marginal cost of the factor of production. Any commercial company seeks to maximize its profits. Therefore, it increases the consumption of resources until the marginal cost does not begin to exceed the income from the use of the new unit.
Price as a determinant
Demand for a resource depends on its value. However, it is important to consider the concept of elasticity. Consider a situation where there is perfect competition in the market . In this case, the demand for the company's products is fully elastic. More difficult are markets with imperfect competition. Here, the company does not adjust to prices, but sets itself. The hiring of each additional unit of resources is carried out with an increase in its productivity and price.
Elasticity of the demand curve
This graph displays all the needs of various industries in these resources. The demand curve takes into account the following elasticity factors:
- The rate of increase (decrease) in the marginal product of the factor in monetary terms. If returns decline slowly, then firms will agree to a slight reduction in price. Here we are dealing with an elastic demand for a resource.
- The demand curve also takes into account the degree and possibility of substitution of the factor of production. If we do not have an alternative to these resources or technologies, then the demand for them is inelastic. In the analysis, it is also important to consider not only the short-term period, but also future prospects.
- The elasticity of demand for products manufactured by the company. Here we can consider a market with perfect competition. Demand for it will be fully elastic. Another situation is possible when the company itself affects the prices of its products. In this case, the demand for the resource will also be inelastic.
- The share of the production factor in total costs. The higher it is, the more elastic is the demand for resources.
The cost of factors of production is a key factor that determines the monetary profit of commercial firms. It carries out the function of allocating all available resources to various sectors of the economy. The higher the rate of return, the wider the influx of factors. Demand for a resource is directly proportional to productivity and its market price. The company uses a set of factors that ensures it maximizes profits. The elasticity of demand for a resource depends on whether the business in question sets prices for its products. There are such factors of demand formation as resource productivity and its price.