The most popular definition of components is the one found in numerous textbooks all over the world, and that is the relationship between the economy and markets. This definition of components is very useful in determining the size of the economy, its balance sheet, its potential growth, and other vital statistics. It is also considered as the most accurate way to determine the state of the economy. However, there are many who disagree on the definition of components, and they have their own explanations on the matter. This article aims to look into these various theories on the matter so that we can properly understand the question posed in the title.
One of the most commonly cited theories on the matter is that of the definition of components. According to this definition, there are different components in an economy but it is not necessary for these components to be arranged into a specific pattern or order. This definition of components is closely followed by economists, and they consider this approach to be highly robust because it is based on real-time data. However, critics argue that defining different components of an economy is not as simple as this because it leads to the conclusion that economies are inherently unstable due to the fact that markets are not perfectly competitive. Moreover, these critics argue that relying on such definitions leads to the conclusion that markets are too complex and that it cannot be easily predicted or measured.
Another group of economists who are generally regarded as the pioneers of applied ecommodity are those of the Chicago School of economics. In their book, “efined systems theory and applied systems analysis”, Brian Wile and Lawrence K. White provided detailed explanations on how markets function and how they evolved through the evolution of human societies. They were able to demonstrate how culture and institutions have played important roles in the emergence of economic markets, and how certain economic features such as exchange rates and level of capitalization evolved along with society itself. These observations by these Chicago School economists laid the foundation for more complex models of economic systems that are still being used today.
In particular, the concept of components was developed by Chicago School economists who believed that there were four components of a market: buyers, suppliers, entrepreneurs and government. The buyers or agents of these components meet to purchase a product at a certain price. This price normally is determined by a set of external factors. The suppliers or agents of these components then attempt to transform raw materials into the goods or services desired by the market consumers. Finally, the entrepreneurs or owners of the business establish new markets by producing goods or services in quantities sufficient to satisfy the demand of the market.
In their book, “A definition of components for industrial activity”, John Locke and Kevin Ward provided another definition of components. According to this notion, the market structure is made up of four distinct components. These are market demand, a supply of goods and services, entrepreneurs, and producers of the goods or services. Each of these components has its own definition that influences the price structure of the market.
For example, demand defines the level of buying power possessed by the market participants. If the supply of the basic raw materials is low, the demand for these goods and services will be high. Therefore, in the long run, prices of these goods will tend to increase. Another component of demand is the ability of the supply of the raw materials to reduce the production cost. This ability of supply is also called a capacity constraint.
On the other hand, if we take a look at the other components, we can see how it affects production. The production cost is affected by the price of raw materials and by the operation costs incurred during production. Entrepreneurs determine the price of the goods or services they produce. Finally, producers establish the production volume that corresponds to the demand of the market.
In any case, one should never confuse components definition with the economic theory of value. The theories of value consider the existence of socially useful goods or services and assume that producers should exchange their goods or services in the market in exchange for money. Components on the other hand only define the quantity of the elements produced. In other words, there is no exchange of the elements because they are not used in the final production.