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EQUILIBRIUM PRICE: The price that exists when a market is in equilibrium. In particular, the equilibrium price is the price that equates the quantity demanded and quantity supplied, which is termed the equilibrium quantity. Moreover, the equilibrium price is simultaneously equal to the both the demand price and supply price. In a market graph, like the one displayed here, the equilibrium price is found at the intersection of the demand curve and the supply curve. The equilibrium price is also commonly referred to as the market-clearing price.

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PRODUCTION:

The process of transforming the natural resources of the land into consumer satisfying consumption goods or productive capital goods. This transformation process involves the four scarce resources or factors of production--labor, capital, land, and entrepreneurship. Although production is generally the physical transformation of materials, it often involves the spatial relocation, or transportation, of commodities, as well.
Scarcity is better addressed and living standards are enhanced by transforming natural resources of the land into more valuable and more satisfying goods. In their natural state raw materials generally provide less satisfaction of wants and needs than they do once processed, transformed, or fabricated into products.

For example, most people obtain greater satisfaction from driving around in a finely crafted sports car than what they might be able to obtain directly from lumps of iron ore, silicon dioxide, bauxite ore, and other car-making materials buried in the Earth's crust. Most people prefer eating a finely crafted hot fudge sundae than what they might be able to obtain directly from the raw, unprocessed cocoa beans, vanilla beans, almond nuts, and maraschino cherries hanging on their respective trees and bushes.

Although production is generally seen as the physical transformation of natural resources, it can also involve the spatial transportation of commodities. A commodity must be in the desired form as well as the desired location to be effectively used.

For example, Duncan Thurly enjoys eating hot fudge sundaes (more so than having unprocessed cocoa beans, vanilla beans, almond nuts, and maraschino cherries hanging on their respective trees and bushes). However, the hot fudge sundae provides little satisfaction if it is located in the Hot Mamma Fudge Ice Cream Shoppe, but Duncan Thurly is in home in suburban Shady Valley ten miles away.

Either Duncan needs to visit the Hot Mamma Fudge Ice Cream Shoppe or the hot fudge sundae needs to be shipped to Duncan's suburban residence. Either action requires the use of scarce resources. In the same manner that scarce resources are used to transform materials into a more suitable physical form, scarce resources are also needed to transport a commodity to a suitable spatial location.

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Recommended Citation:

PRODUCTION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: May 26, 2022].


Check Out These Related Terms...

     | factors of production | allocation | resource allocation | three questions of allocation | satisfaction | value |


Or For A Little Background...

     | scarcity | labor | capital | land | natural resources | entrepreneurship | wants | needs | good | service | economic good |


And For Further Study...

     | opportunity cost | production possibilities | fourth rule of competition | distribution standards | specialization | technology | free lunch | gross domestic product |


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