Economic unit
Encyclopedia
In an economy
, production
, consumption
and exchange
are carried out by two basic economic units: the firm and the household.
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
, production
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
, consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
and exchange
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
are carried out by two basic economic units: the firm and the household.
- Firm
- The firm makes production decisions. These include what goodsProduct (business)In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
to produce, how these goods are to be produced and what prices to charge. It employs the various factors in production, and it sells the finished goods to the household for consumption.
- The firm makes production decisions. These include what goods
- Household
- The household is responsible for making consumption decisions and owns factors of productionFactors of productionIn economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
. It provides the firm with factor services in production, and buys the finished goods from the firm for consumption.
- The household is responsible for making consumption decisions and owns factors of production
- Government
- Financial
- Overseas