Tag: money

The reason money is not an economic resource is because it is not productive. Have you ever seen a copywriter write with money or, an employee transporting goods from a factory with money instead of a logistics vehicle?

We create money, at least through the central bank. It’s just like we produce goods and services. But, unlike semi-finished goods, we cannot use money to produce other goods.

But, indeed, in the modern economy, money plays a vital role. With it, we store wealth. We also use money to facilitate transactions, for example to pay for the goods we buy. And, with money, we can judge the value of an item because money functions as a unit of account.

Money is not a productive resource

Money may be scarce and the central bank is responsible for printing it. If it is available in abundance – the central bank prints a lot of money – it can lead to high inflation and even hyperinflation.

Money does not contribute directly to production. Although it is rare, we cannot use it directly as an input or help the production process. For example, car manufacturers use aluminum inputs to produce car frames, not money. Likewise, …

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Making more profit and money is the main benefit of creating value for customers. Businesses make a profit by satisfying customer needs and wants through their products by adding value. They process inputs into higher value outputs.

What is value creation to customers?

Creating value means the business adds value to the inputs used. How much value is added? It is equal to the difference between the selling price of the product and the input costs.

Is the company successful in creating value? We can see it from whether customers are willing to pay a higher price than the input costs used to make goods or provide services.

And, creating value is the reason why business exists. Without it, they will not be able to survive because they bear the loss. Consumers do not want to buy if the product has no value to satisfy their needs and wants.

Take the tire manufacturer as an example. They buy raw materials such as rubber latex to be converted into final goods. To do so, they need locations for factories, machines to process inputs and labor to operate machines and factories. Then, after the tires are finished, they sell them to consumers. …

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