microeconomic

Micro Economics
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1. Factors of Production
In economics, the factors of production refer to the various inputs, resources, items, goods, and services that are used in the manufacturing process to create finished goods and services. Currently, these factors are identified as producer goods since the final consumer does not use them. There are four factors of production in economics and they include: land, labor, capital and enterprise. In the manufacturing process, the industry requires a combination of all the inputs to generate the output (Krugman, Wells, & Olney, 2007).
Land refers to the physical place and all the natural resources where the production activities occur. For example, a fertile farm land, timber, fisheries, temperate climate, and renewable energy. The reward for this factor of production is rent. Labor refers to the human input employed in the manufacturing process. It has the qualities of flexibility, and its reward is wages.
Capital refers to all fixed assets and monetary resources used in the production process. The financial items acquire other factors of production. The property classified under capital element includes buildings and equipment. The reward for this resource to the owners is the interest.
Entrepreneurship refers to a specialized labor that involves taking risks by individuals through the application of skills and knowledge in investments. Entrepreneurs assume the managerial role in acquiring, allocating and distributing economic resources.

Entrepreneurs earn profit from their investments.
Land as a factor of production is limited as its supply is always fixed. This scarce input requires proper decisions and investments to generate maximum output. In many economies, some regulations control its usage for efficient utilization of resources. The natural land is limited although some forms of land factors such as timber and energy are renewable. The contribution of land factor can be increased through proper allocation, improving the quality of land and full utilization of the resources. For efficient use of the land resource by any economy, there has to be a mix of natural and industrial use of land factor. Land used for industrial purposes facilitates the conversion of natural resources into the final output.
2. Supply and demand
Market equilibrium is a state in economics where the demand forces and supply forces are balanced. In a nutshell, the equilibrium state occurs when the items supplied equals the goods demanded. The suppliers of the products and services provide to the market the exact amount required by the consumers. The market condition will remain in a constant state unless an external force influences the market. At the state of equilibrium, the goods are sold and purchased at a regular price referred as the equilibrium price determined by market forces. Further, the amounts of goods sold at equilibrium price are known as the equilibrium quantities. The equilibrium price is expected to remain constant unless a there is a change in the variables. Therefore, it is known to as the competitive price (Krugman, Wells, & Olney, 2007).
The state exists through the interaction of market forces of demand and supply variables. The condition, however, does not represent the state of happiness among the participants. This is due to the variation of the buying habits among people as a result of different needs and wants. Further, the balance could be a normative equilibrium where the equilibrium price is unaffordable at the current state. For instance, this scenario is worse during times of starvations where the cost of goods is prohibitive.
In demand and supply, substitutes refer to the products used interchangeably. Substitutes are perceived to be similar, and ownership of one product reduces the desire for the other. When the price of a substitute rises, the demand for the other product also increases. Complementary goods are those with joint demand as they are used together. Therefore, an increase in demand for one product results in the increase in demand for the other product.
3. Levels of competition
There are four models of competition in an economy, and they include monopolistic, oligopoly, pure competition and pure monopoly (Krugman, Wells, & Olney, 2007). Monopolistic competition is a market with many suppliers and low barriers to entry. In this market, vendors compete through product differentiation and advertisements.
Oligopoly comprises of markets made of providers who have a significant impact on the prices. There exist high barriers to entry associated with huge startup capital and technology. A pure monopoly comprises of a single supplier who determines the price of commodities. A monopoly has powers over the competitors gained from the high barriers thus faces little or no competition. Finally, the purely competitive market has many suppliers who trade in standardized products. The market forces of supply and demand determine the prices for goods.
The pure competitive market is favorable to operate a business as the barriers to these markets are low thus enabling the smooth start of any business. A large number of suppliers and producers create competition aimed at satisfying all the consumers. These markets offer a wide variety of products for the customers to choose. In this market, no sole supplier or buyer dictates the operation of the market in the determination of prices and quantities to be sold. Therefore, this market is preferred over the other markets. Further, firms in a purely competitive market operate with a profit motive. The companies earn normal profits since there is no information failure, time lags, and externalities. These characteristics further translate to earnings of incentives by the entrepreneurs for the risks taken in the market.
References
Krugman, P., Wells, R., & Olney, M. (2007). Essentials of economics (1st ed.). New York, NY: Worth Publ.