A want is a good or service which people would like to have, but which is not essential for living. People’s wants are unlimited.
The economic problem is that there are unlimited wants but limited resources to produce the goods and services to satisfy those wants. This creates scarcity.
The factors of production are those resources needed to produce goods or services. There are four factors of production and they are in limited supply.
To produce any good or service, a business must utilize four scarch resources. If any of these factors are missing, production cannot happen.
The four factors are:
land: all natural resources provided by nature (e.g. fields, forests, oil, metals)
labor: number of people available to make products, involves the human effort, skills, and mental or physical work put into production process
capital: finance, machinery and equipment needed for the manufacture of goods
enterprise: the skill and risk-taking ability of the person who brings the other resources or factors of production together to produce a good/service.
Increase the selling price while keeping cost of materials the same. This can be to establish a higher quality image for its product or service. Consumers might be convinced to buy it at a high price as a novelty factor.
Other costs might increase when trying to create this quality image.
Reduce the cost of materials but keep the price the same. The firm could use cheaper wood, bricks, etc. A higher value would be added if this method is used.
Lower priced materials might lower the quality of the product.