Study Guide to Man, Economy, and State with Power and Market

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Chapter 1: Fundamentals of Human Action 7 6. Factors of Production: The Law of Returns Units of producers’ goods are also evaluated on the margin. The value assigned to a unit of a producers’ good is the value of the consumers’ goods that would be lost if the marginal unit of the producers’ good in question were no longer available. (This is the marginal product of the factor of production.) The factors of production necessary to produce a certain consumer good are called complementary factors of production. The law of returns states that with the quantity of complementary factors held constant, there always exists some optimum amount of the varying factor. 7. Factors of Production: Convertibility and Valuation Factors of production differ in their degree of specificity, i.e., the variety of consumers’ goods that they can produce. Labor is completely nonspecific, because it is used in the production of every consumers’ good. The less specific a factor is, the more convertible it is when conditions change and plans must be altered. 8. Factors of Production: Labor versus Leisure Throughout the book we assume that human beings find labor onerous; i.e., we assume that individuals value leisure as a consumer good. 9. The Formation of Capital Capital goods can be produced only through the act of saving, i.e., consuming less in the present than one’s means allow. We can imagine Robinson Crusoe on his desert island, able to pick berries with his bare hands. If Crusoe invests some of his
8 Study Guide to Man, Economy, and State with Power and Market labor, not on immediate consumption (i.e., picking berries), but rather on the creation of capital goods such as a stick, then he can increase his future consumption of berries. This would be a “roundabout” method of picking berries; in general these methods are more physically productive than shorter, more direct methods. An actor will opt for longer, more roundabout methods so long as the enhanced output more than offsets the increased waiting time, which in itself is a disadvantage because of time preference.
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Chapter 6: Production: The Rate of
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Chapter Summary Entrepreneurial pro
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Chapter 8: Production: Entrepreneur
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Chapter Summary Consumer preference
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Chapter 10: Monopoly and Competitio
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Chapter Summary Economists often ta
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Chapter 1: Defense Services on the
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Chapter Outline 1. Types of Interve
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Chapter Summary Society is composed
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Index 251 Equilibrium, 47, 104 macr
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Index 253 Medium of exchange, 27, 3
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Index 255 See also Economy, Evenly
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