Organized Produce Markets (II)

These markets are distinctive in that buying and selling takes place in a recognized building business is governed by agreed rules and conventions, and often only certain persons are allowed to engage in transactions. They are thus a highly developed form of market. Today, London has exchanges or auction centers for such commodities as rubber, wool, tea, coffee, furs, metals (tin, copper, lead and zinc), grain, and shipping freights (the Baltic Exchange). It must not be thought, however, that such organised produce markets exist only in London. Liverpool has exchanges for cotton and grain, and most of the other large trading countries have exchanges too. Although today many of the goods go directly to other countries, the earnings of London dealers are part of the UK's income from 'invisible exports'.

Broadly speaking, organised markets fulfill three main functions. First, they enable manufacturers and wholesalers to obtain supplies of commodi­ties easily, quickly and at the competitive market price. Because they are composed of specialist buyers and sellers, prices are sensitive to any change in demand and supply. Thus they are perfect markets.

The Factors of Production (I)

The classical economists divided the factors of production into four groups: land, labour, capital and organization. These groups were called rent, wages, interest and profit, respectively. Such a classification, based on physical characteristics has serious, weaknesses, e.g. the training of a worker represents an input of capital. Thus present-day economists conduct much of their analysis by talking about factors of production generally - resources which cooperate in the production of goods and services wanted by the community. But they also recognize that certain factors do have some common, broad and important characteristics which permit a general classification useful for purposes of analysis and so the old classical economists' terminology has been retained.

Land now refers solely to the resources provided by nature, e.g. space, rain and minerals. In practice, it is treated as a separate factor of production in order to examine the nature of the earnings of any factor which is fixed in supply. Labour refers to the actual effort, both physical and mental, made by human beings in production. It is this 'human' element which distinguishes it from other factors, for it gives rise to special problems regarding mobility, unemployment and psychological attitudes. Capital, as opposed to land, is man-made.

Goods

Goods can be classified as:

• consumer goods: those goods which directly satisfy customers' wants and are in the hands of the consumer, e.g. a loaf, a bicycle, a table.

• producer goods: those goods which are not wanted directly for their own sake, but for the contribution they make to the production of consumer goods, e.g. buildings, machines, tools, raw materials.

Enterprise refers to the acceptance of the risks of production which arise through uncertainty. This is a somewhat narrower meaning than that given by the classical economists to the entrepreneur - the person or persons who decided what goods to produce and brought the factors of production together to produce them. Today the role of organizing the factors of production is regarded as a managerial function which can be performed by a paid manager, i.e. by a highly skilled form of labour.