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Production of Goods

Production of Goods - Production of Goods .The .Afirmis...

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Production of Goods The  theory of the consumer  is used to explain the market  demand  for goods and services. The  theory of the firm  provides an explanation for the market  supply  of goods and services. A  firm  is  defined as any organization of individuals that purchases factors of production (labor, capital, and  raw materials) in order to produce goods and services that are sold to consumers, governments, or  other firms. The theory of the firm assumes that the firm's primary objective is to  maximize profits.  In  maximizing profits, firms are subject to two constraints: the consumers' demand for their product and  the costs of production.  Consider a firm that produces a single good. In order to produce this good, the firm must employ or  purchase a number of different factors of production. The firm's  production decision  is to determine  how much of each factor of production to employ. 
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