Author Question: Why do we have to pay a price for most of the goods we consume? What will be an ideal ... (Read 48 times)

nautica902 · **on:** Jun 29, 2018

Why do we have to pay a price for most of the goods we consume?

What will be an ideal response?

Question 2

Define the factor of production called capital. Give three examples of capital, different from those in the chapter. Distinguish between the factor of production capital and financial capital.

What will be an ideal response?

Carissamariew · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The inputs we use to produce most goods and services (for example, capital and labor) are scarce. Therefore almost all goods and services are scarce compared to the quantity that consumers want to consume. In other words, at a price of zero the demand for most goods is higher than the available supply; our wants are unlimited but our resources are not. Prices act as a rationing mechanism to prevent the overconsumption of such scarce goods, making them available in the quantity such thatthe supply of these goods matches the demand.

Answer to Question 2

Capital is the tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services. Capital includes railroad engines and cars, servers, and ATMs. The factor of production capital is the actual good itself; financial capital, such as stocks and bonds, are the funds that provide businesses with their financial resources which can be used to ac-quire capital goods.