Supply of labour.
Though all people have to work to earn money, the economistis ask how much people are prepared to work. Finding the right balance between work and leisure time is one of the trade-offs. It depends on many things. First of all, there are natural limits, as threr are 24 hours in a day and we can not spend all of them working. Also, we need time for speep, food and rest. Secondly, money plays a role. There are two ways the money influences working hours: the income effect and substitution effect. Income effect works like this^ People’s time is a resource. People with higher rates of pay can afford to have more leisure time than people on lower rates of pay. Substitutional effect possess a question, how much will you loose not working? As the wage increases, opportunity cost of not working also increases, and people want to work more hours.
Factors of production.
There are three factors of production: land, labour and capital.The basic factor is land. Land means everything that nature provides and we can use for production. It includes raw materials like coal, metals, oil. The second factor is labour. Labour means the physical effort such as digging. It also includes mental work like thinking. The thir factor is capital. It includes buildings, tools and equipment. They were identified by Adam Smith. However, more recent economists have identified one more factor: entrepreneurship – people with great business ideas that set the economy in motion.
15.Division of labour
Division of labour and specialization make the manufacturing process more efficient and productive. Workers perform their operations automatically. This speeds up the productivity of the labour force and improves the quality of their work.
Surplus
The market price is a reward for the efforts of the producer. If the price on the market is lower than expected, the buyer will get a bargain. Surplus measures the utility that the consumer gains from his purchase, or the profit that the producer makes. The difference between the price that consumers are prepared to pay and the price that they really pay is called consumer surplus; it is a very important economic concept. Companies make use of many pricing tricks which help them to increase their profits.
Price discrimination
Prices can be set higher or lower than the market price; sometimes companies use price discrimination. This means charging different prices for the same product to different customers. There are different types of this discriminarions. First degree price discrimination is when almost every consumer pays a different price for the same product. Auctions are becoming very popular, for example, on the Internet. In an auction all participants make bids, and the highest wins. Second degree price discrimination involves changing price according to how much of the product is sold. Third degree price discrimination is when certain types of customer are charged different prices. (expl. Pensioners, student get discounts)