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Chapter: Civil - Engineering Economics and Cost analysis - Basic Economics

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Basic characteristics of land in economics

In economics, land is one of three types of resources. There are land, labor, and capital. Resources are those things that are used to make other goods and services.

Basic characteristics of land in economics

 

In economics, land is one of three types of resources. There are land, labor, and capital. Resources are those things that are used to make other goods and services.

 

Land

 

Land is defined as anything that is not made by humans but is exploited to produce a good or service. Some examples of land would be

 

The surface area on which a building is built

 

Crude oil that can be taken from the ground

Any mineral that occurs naturally and can be mined for use.

 

Land does not include something like the wheat that goes into bread. That is a natural product, but it was produced by people's efforts.

 

Labour economics

 

Labour economics seeks to understand the functioning and dynamics of the markets for wage labour. Labour markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demands of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income.

 

 

In economics, labour is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have developed a concept called human capital (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms.

 

Large Scale and Small Scale Production Compared

 

Modern times have witnessed a wonderfully rapid growth in the average size of the individual business. Indeed, the change in the size of the business unit during the past half-century is almost as striking as the change from house industry to factory industry in the second half of the eighteenth century. The movement has gone so far and is still proceeding so rapidly as to excite very general fear as to its social consequences. Certain dangers resulting from the consolidation of large competing corporations will be discussed elsewhere.; but it is pertinent at this point, in connection with the subject of the organization of production, to advert briefly to the advantages claimed for large scale production and to the compensating advantages enjoyed by small scale producers.

 

Advantages of Large Scale Production. The advantages claimed for production on a large scale resolve themselves into two general classes: (1) economies in making the goods, and (2) economies in marketing the goods. As to the first, it is claimed that in production on a large scale there is a saving in (a) capital cost, per unit of product, both in fixed and in circulating capital; in

 

(5) labor cost, owing to the possibility of more efficient organization ; in (c) the possibility of making improvements, both through the employment of special investigators and inventors, and through the comparison of methods in different departments of the same factory or in the same departments of different factories under the same ownership; in (d) the cost of superintendence; in (e) the utilization of waste, as is instanced by the Standard Oil Company and the large beef and pork packing companies; in (f) providing their own aids to making and marketingmaking their own cans, boxes, etc., and owning railways and steamship lines, etc. In businesses enjoying this last advantage, we have examples of integration of industry as well as of concentration of industry.

 

Among the second class of advantages claimed for large scale production, economies in marketing the goods, are the following: (a) economy in securing trade, through advertising and commercial travellers; (6) economy in "carrying " stocks of goods, a relatively smaller stock being sufficient to meet the fluctuations in demand; (c) economy in getting goods to consumers, through the power to secure better freight rates for large shipments, and through the power possessed by some concerns to avoid "cross freights"; (d) economy in securing a foreign market, through the greater power of the large concern to withstand the cutthroat competition common in "hard times."

 

The Strong Points of Small Scale Productio. Against these alleged advantages of large scale production may be set the following considerations which seem to promise a continuation of a considerable measure of small scale production, at least in certain lines of industry: (a) First of all, it is claimed by experts that in many lines of business a plant of moderate size is the plant of really maximum efficiency in regard to capital and labor costs. (6) In many cases the advantage of the large scale business in the matter of concentration of power is neutralized by the fact that modern invention, especially in connection with electricity, is revolutionizing the methods of distribution of power, putting the small manufacturer on a level with his greater rival, (c) It is, furthermore, very doubtful whether large scale producers can secure that minute and economical supervision which characterizes small scale industry ; whether, in other words, hired managers can compete in this regard with individual entrepreneurs who will reap all gains as they bear all risks. (d) The small producer has a distinct advantage in his greater power to know the personal wants of his market. In many industries the personal element plays so large a part that the small producer will for a long time be able to hold his own, even if he cannot oust the large producer from the field. Finally, by cooperation of neighboring small producers, it is possible to secure much the same opportunities as to (e) invention and improvement of processes and (f) utilization of " waste " that we have spoken of as regularly inhering in large scale industry.

 

It must be borne in mind that our comparison has been between small scale and large scale production, not between small scale production and monopolized production. Monopolized production is usually, though by no means always, production on a large scale. But production on a large scale is not at all the same thing as monopolized production. Had we been speaking of the production of monopolized goods, it would have been possible to add many to the list of alleged advantages or economies in production, and some of the advantages of which we have spoken would in the case of a monopoly have been much more marked and undisputed. Thus in the matter of "cross freights" and again in the case of advertising, many would admit advantages in the case of a monopoly who would deny that they accrue simply to large scale production.

 

This whole matter of the relative advantages of small scale and large scale production has been of late days the subject of rather acrimonious debate, and can by no means be regarded as settled.

 

We have chosen, therefore, to write rather suggestively than positively. For this very reason, however, the topic should furnish the better material for discussions and debate by the class.

 

Production (economics)

 

Production is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output). It is the act of creating output, a good or service which has value and contributes to the utility of individuals.

 

Economic well-being is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human needs. The degree to which the needs are satisfied is often accepted as a measure of economic well-being. In production there are two features which explain increasing economic well-being. They are improving quality-price-ratio of commodities and increasing incomes from growing and more efficient market production.

 

The most important forms of production are

 

market production

 

public production

 

household production

 

In order to understand the origin of the economic well-being we must understand these three production processes. All of them produce commodities which have value and contribute to well-being of individuals.

 

The satisfaction of needs originates from the use of the commodities which are produced. The need satisfaction increases when the quality-price-ratio of the commodities improves and more satisfaction is achieved at less cost. Improving the quality-price-ratio of commodities is to a producer an essential way to enhance the production performance but this kind of gains distributed to customers cannot be measured with production data.

 

Economic well-being also increases due to the growth of incomes that are gained from the growing and more efficient market production. Market production is the only one production form which creates and distributes incomes to stakeholders. Public production and household production are financed by the incomes generated in market production. Thus market production has a double role in creating well-being, i.e. the role of producing developing commodities and the role to creating income. Because of this double role market production is the 'primus motor' of economic well-being and therefore here under review.

 


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