Producing the Right Goods in the Right Way

While it is true that humans have to during their lives confront scarcity and cannot have everything they want, it is also true that they have a good number of options. The technology of production is now so advanced that people can convert the limited source of resources in the plant into a variety of goods and services, amongst these things such as automobiles, airplanes, computers, video games, sites, treatments for diseases, etc, etc.

The interesting thing is that thanks to these advancements and technology and the number of options people have along their ways, people are very spoiled. For this reason, it is important to choose in an intelligent way amongst the vast variety of goods and services that can be produced, especially if you want to turn the limited resources of the earth in goods and services that offer the greatest amount of happiness as possible.

In the following we will be explaining how the economists analyze the processes by which societies choose exactly what they should in order to maximize human happiness. For every society, the process can be divided into a couple easy steps.

  • People need to find all of the combinations of goods and services they can produce given their limited resources and the technology actually available.
  • People and society need to choose one of these combinations of products, ideally the combination that produces the most amount of happiness.

Economists conceive the success of each one of those steps in terms of two specific types of efficiency:

  • Productive efficiency implies producing any kind of good or service using the minimum amount of resources.
  • Distributive efficiency implies producing the goods and services that will make people happier, and produce them in the right amounts.

This will show people how they can achieve both productive efficiency as well as distributive efficiency, in other words, how a society determines what is possible to produce as well as what is convenient to produce.