Está en la página 1de 3

Three Big Microeconomic Questions Look at the world around you.

You see an enormous range of things that you might buy and jobs that you might do. You also see a huge range of incomes and wealth. Microeconomics explains much of what you see by addressing three big questions: _ What goods and services are produced? _ How are goods and services produced? _ For whom are goods and services produced? What Goods and Services Are Produced? The objects that people value and produce to satisfy wants are called goods and services. Goods are physical objects such as golf balls. Services are tasks performed for people such as haircuts. What are the goods and services that we produce in the United States today? Figure 1.1 shows the surprising answer. We are a service economy. The largest item produced is real estate services (realtors). Retail and wholesale trades come next, and health services and education complete the largest five. The largest categories of goods construction, electronic equipment such as computers, food, industrial equipment, and chemicals each account for less than 4 percent of the value of total production. Figure 1.2 shows the trends in what we produce. Sixty years ago, 25 percent of Americans worked on farms, 30 percent in mining, construction, and manufacturing, and 45 percent produced services. By 2000, almost 80 percent of working Americans had jobs producing services. Mining, construction, and manufacturing jobs had shrunk to 20 percent, and farm jobs had almost disappeared. Youve reviewed some of the facts about what we produce in the United States. These facts raise the deeper question: What determines the quantities of realtor services, new homes, DVD players, and corn that we produce? Microeconomics provides some answers to these questions. How Are Goods and Services Produced? The range of jobs that you might do keeps changing. When Henry Ford built the worlds first auto assembly line, he destroyed the jobs of the skilled craft workers who built cars using hand tools and created jobs for a new type of auto assembly worker. Every year, as businesses adopt new production technologies, similar changes occur. Today, it is information technology businesses that are producing new products, creating new jobs, and destroying old ones. We call the resources that businesses use to produce goods and services factors of production. Factors of production are grouped into four categories: _ Land _ Labor _ Capital _ Entrepreneurship Land The gifts of nature that we use to produce goods and services are called land. In economics, land is what in everyday language we call natural resources. It includes land in the everyday sense, minerals, and water.

The United States covers 2 billion acres and we live on about 5 percent of this land. The other 95 percent is equally divided between farmland and other use such as lakes and rivers, national parks, and forests. Urban land is expanding and rural land is shrinking, but slowly. Our land surface and water resources are renewable, and some of our mineral resources can be recycled. But many mineral resources, and all those that we use to create energy, are nonrenewable resources they can be used only once. Labor The work time and work effort that people devote to producing goods and services is called labor. Labor includes the physical and mental efforts of all the people who work on farms and construction sites and in factories, shops, and offices. In the United States in 2001, 141 million people had jobs or were available for work. An increasing population and an increasing percentage of women with jobs have increased the quantity of labor available. The quality of labor depends on human capital, which is the knowledge and skill that people obtain from education, on-the-job training, and work experience. You are building your own human capital right now as you work on your economics course, and your human capital will continue to grow as you become better at your job. Today, more than 80 percent of the U.S. population has completed high school and 25 percent has a college or university degree. Figure 1.3 shows a measure of the growth of human capital in the United States over the past century. Capital The tools, instruments, machines, buildings, and other constructions that businesses now use to produce goods and services are called capital. The quantity of capital grows steadily over time. Entrepreneurship The human resource that organizes labor, land, and capital is called entrepreneurship. Entrepreneurs come up with new ideas about what and how to produce, make business decisions, and bear the risks that arise from these decisions. Youve reviewed some of the facts about how we produce in the United States. These facts raise deeper questions such as: What determines the quantities of labor and capital that get used? Microeconomics provides some answers to these questions. For Whom Are Goods and Services Produced? Who gets the goods and services that are produced depends on the incomes that people earn. The movie star who earns a few million dollars a year buys a large quantity of goods and services. A homeless unemployed person has few options and a small quantity of goods and services. To earn an income, people sell the services of the factors of production they own: _ Land earns rent. _ Labor earns wages. _ Capital earns interest. _ Entrepreneurship earns profit. Which factor of production earns the most income? The answer is labor. Total wages (including fringe benefits) were 71 percent of total income in 2000. Land, capital, and entrepreneurship share the remaining 29 percent. And over time, these percentages have been remarkably constant.()