The Significance and Importance of Money, Article Review Example

This article explains the significance of money in an economy. It is an undeniable fact that most of the economic activities world over are transacted on the basis of exchange of goods and services for money. In the production process, money is used in the acquisition of raw materials, combination of other factors of production and payment of related goods and services (Blurtit, 2009).

In consumption, money enables consumers to purchase goods and services with which to meet their needs. Through prudent budgeting for the money he has, a consumer is able to get maximum satisfaction of his needs. Money has also enabled easy transaction of cross border trade after eliminating previous reliance of barter trade. It is easy to determine prices of goods independent of others using money. Money is also significant as it helps in distributing a firm’s income to various factors of production, and in the assessment of the marginal productivity of each of the factors of production.

Factors of Production: www.landandfreedom.org/econ/econ2.htm –

This article considers three factors of production recognized by economists, each of which plays a distinct role in the production process. These are land, labour and capital. Land encompasses the raw materials that are found on it. It includes sunlight and air; water, forests, the earth and minerals; and other raw materials and opportunities created independent of man (www.landandfreedom.org/econ/econ2.htm -).

Labour refers to man’s effort put in the production process. Man plays an important role in organizing the other factors of production. It is manifested in the application of brains, brawn or a combination of the two in applying capital on land in order to create wealth. Capital refers to the goods or tools that are employed by labour in the production of goods and services. They are also referred to as capital goods, as opposed to the consumer goods which are actually manufactured for consumption. Capital goods assist in the production of consumer goods.

References

Factors of Production. Retrieved September 12, 2009, from www.landandfreedom.org/econ/econ2.htm –

Blurtit. (2009). How To Define Significance And Importance Of Money? Retrieved September 12, 2009, from http://www.blurtit.com/q853783.html