A producer creates and supplies goods or services. They typically combine labour and capital – sometimes called factors of production – to create output. Businesses are the main examples of producers and are usually what economists have mind when talking about producers. However governments are producers of some kinds of services (such as police services, public schools, universal mail delivery and defence) and sometimes goods, such as when a government owns natural resources. Households and individuals are producers of non-market goods and services, such as child-rearing, cleaning and food cooking.
Producers pay wages to workers. This may include salaries, bonuses and benefits such as health insurance. Producers also pay for capital. This is called economic rent and includes interest payments. Anything that is left over for the owner of the business is called economic profit.
Increasingly some consumers are also becoming producers as the scale and cost of marshalling resources to create goods and services falls. They become ‘prosumers’.
To what extent are the boundaries between producers and consumers becoming increasingly blurred? Is this happening more in the provision of services, rather than goods; and is it more likely in social media contexts?
Does the traditional role of a producer remain relevant for provision of economic infrastructure and, more importantly, the delivery of services from that infrastructure?
This Micro Brief is part of an ongoing series provided by Lytton Advisory as a general public information service. These concepts underpin modern economic analysis. Find out more about smarter capital investment decisions using economics at www.lyttonadvisory.com.au.