So, how do producers determine what to produce? As we all know, our want s are unlimited but our resources are limited, therefore it is simply impossible to produce all goods in H.K., we have to make choices Let’s look at a typical demonstration and see how producers determine what goods and what quantities of goods to produce though price mechanism. In the ladies’ market in H.K.,
Since those Rolex watches are so popular, the seller worries that they will run out of stock so he increases the price of those watches at least until new shipments arrive.
When the Rolex watches become more expensive, some customers will choose to buy fewer of them and more of its substitutes. With the rise in price, the seller may even earn more profits.
Other producers also see the potential market in producing such watches. They stop making something else but produce more shirts to satisfy demand. Therefore, more resources will be attracted into such business and so resources are allocated in such way. All in all, individuals produce goods, which follow their own self-interest and provide them the highest return.
As for the method of production, producers have to decide how to combine scarce inputs into production. They are interested in minimizing their total cost of production at the same time, trying to get the maximum output per unit of input. Normally in H.K., employers will employ more employees if their salaries are low. If their salaries are increased, more machines will be used to replace workers. Like, nowadays writers no longer write out their own work but type them out for publication, which increases efficiency and saves time. Division of labour is also a common method of production in H.K. As workers specialize in jobs which they are most suitable, productivity is raised.
As for the distribution of goods, goods are normally distributed to those who are willing and able to pay the price.
Another way to distribute goods in Hong Kong is by auction. People who can better afford to pay will receive the good. Valuable land in Hong Kong is sold to the buyer who bids the highest price.
In H.K., non-price criteria is also one of the ways which helps to allocate goods. For example, in Miss Hong Kong, goods are allocated to those with beauty. As for the receival of a senior citizen card, you have to reach a certain age.
All in all, people in H.K. have a great deal of freedom and can do whatever they want as long as it is legal.
