A model is a representation of a theory or event. An economic model is a simplified representation of economic processes. This representation can be used to:
gain a better understanding of the theory,
to explain the theory to others
to generate hypotheses about economic behavior, that can be compared against economic outcomes.
In economics, a production function represents the relationship between the output and the combination of factors, or inputs, used to obtain it.
Q=f(L,K)
Where:
- Q is the quantity of products
- L the quantity of labor applied to the production of Q, for example, hours of labor in a month.
- K the hours of capital applied to the production of Q, for example, hours a machine has been working for the production of Q.
There can be other inputs, K and L are just examples.
The most common division of economics is that which separates macroeconomics from microeconomics. The difference between macro and micro was introduced in 1933 by the Norwegian, Ragnar Frisch. The origin of the words says a lot about their meaning: in Greek, macro means big and micro means small.
A production function is a relationship between outputs and a combination of factors used to obtain it.
Given a technology, a production function shows us that the quantity of a product Q that is obtainable by a business, is a function of the quantities of capital (K), labor (L), land (P) and business initiative (H), so that:
Economics is a social science that studies the way in which people, organizations and countries assign resources. Its objective is to study the relationships between production, distribution, exchange and consumption of goods, services and ideas.
The main objective of economics is to enhance the well being of people, but this does not necessarily mean to grant them the greatest amount of consumer goods.
Renewable Resources are those resources that are not exhausted by their utilization. They return to their original state or are regenerated quicker than they are decreased by its use.
Resources are those capacities and elements (both natural and man-made) that can be used to produce goods or services, or that have an intrinsic value without the need to be modified, and are scarce in relation to the current or potential demand.
Competitiveness is the capability a country or company has to achieve profitability in the market in relation to its competitors.
Competitiveness depends on the relationship between the value and quantity of the outputs offered and the inputs needed to obtain profitability (productivity), as well as the productivity of the other bidders that exist in the market. The concept of competitiveness can be applied to both a company and a country.
