The variable productive services may be broadly classified into three groups. These are— intermediate goods, natural resources, and labour.
Type # 1. Supply of Intermediate Goods:
Intermediate goods are produced inputs. The firms produce them and they themselves buy them—one firm buying the goods produced by some other firms or by itself. For example, jute and cotton are produced by farmers and sold to the manufacturing firms as intermediate goods.
Similarly, instruments and machines are produced by some firms and sold to other firms which need them as intermediate goods. The supply curves of intermediate goods are positively sloped. For these goods are commodities and the law of supply of goods and services applies to them.
Type # 2. Supply of Natural Resources:
Natural resources are mainly obtained from mining of the ores which may be regarded as commodity outputs produced by mining operations. Therefore, their supply is also subject to the law of supply of goods and services, and so, their supply curves also would be positively sloped.
Type # 3. Supply of Labour:
ADVERTISEMENTS:
Labour is the most important class of inputs because labour services are supplied by human beings from their hours of leisure; they are not supplied by firms. The suppliers of labour, i.e., the workers themselves, would have to be present in the workshop to supply their labour.
In lieu of labour, they earn income. The firms sell the inputs like intermediate goods and mineral ores with a goal of maximising profit whereas the workers supply their labour to earn income but not to maximise income because then they would have to work all the 24 hours of the day.
The greater the amount of income a worker wants to earn by supplying more hours of work, the smaller would be his hours of leisure for sleeping, eating and other non-work activities. The worker, therefore, divides his hours between work and leisure in such a way, i.e., he chooses such a combination of income and leisure that his utility is maximised.
By supplying labour, the worker, therefore, wants to maximise utility subject to the constraint that he has only 24 hours in a day to divide between work and leisure.