In the production process, factors of production can be more or less specific. The specificity of a factor of production refers to its ability to be used in the production of a particular consumer good. Specialized factors of production can only be used to create one consumer good, whereas non-specific factors can be used in the production process of numerous different consumer goods.
A highly specific factor of production is a unique resource that can be utilized for only one particular purpose. This type of factor can be valued only in relation to the single good that it can produce. For example, a medicinal herb that has no other known medicinal benefits, tastes bad, and has no nourishment value is a highly specific factor of production. This herb can only be used to cure stomach ache and is not desired for any other purpose. The specific factor in this case is only valued in relation to the stomach ache cure that it can produce. Once the value of the cure decreases or disappears, the specific factor will lose its value as well.
On the other hand, a non-specific factor of production such as iron can be shaped into various products such as swords, engines or jewelry. If the value of any of these products decreases, the factor of production retains some value relative to the other still valued products. The iron factor of production can still be used in the production of other goods even if the demand for swords decreases.
If the value of a good changes, the value of its specific factor will change more drastically than that of the generic factor. A specific factor that is tied to one good is more susceptible to market changes than a generic factor that can be used in multiple production processes.
Specialized factors of production are vital to the production process but are susceptible to market changes. The specificity of a factor of production determines the extent to which it can be used in the production of consumer goods. While non-specific factors retain some value even if the demand for certain products decreases, specific factors lose their value once the product they produce becomes less valuable. This chapter highlights the impact of the specificity of factors of production on the production process and how it affects their value in the market.
[[Means]] [[Scarcity]] [[Production goods]]]