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To produce goods, resources must be used. These resources are the factors of production.

Keeping things simple, we will only discuss running a raw materials company such as iron (with no additional market licenses). As an employer of a raw company, the only factor of production is having enough money to pay employees. This translates into production, which satisfies your need for raw material.

There are two primary methods of using the produced raw:

1. It can be sold on the Marketplace (or traded).

2. It can be used to produce its respective value added good, such as weapons or food to be sold.

Another key concept in economics related to scarcity is opportunity cost. This is the additional cost associated to using the second best choice available among several comparable options.

As a producer of raw you obviously have a need for that material. Two primary ways of acquiring it are possible, one is paying an employee to receive an anticipated quantity. The second is simply buying it from the Marketplace at a competitive price. Opportunity cost will be incurred through not choosing the most appropriate option.

As an example, I decide to post a job offer to Skill Level 11's for my Iron company. I know they will produce 102 units each day at full health. The market is selling Iron for 0.53 each. This means to break even I could offer a daily salary of $54.06. I'm posting my job offer alongside other offers selling profitable items such as houses. They offer $55 so I make my decision based on that to stay competitive. I choose a wage of $55. In reality, I'm paying one cent more per unit than I could have from the Marketplace. I should be posting an offer where these company's are not offering.

Regardless of what you intend to do with the Iron, the opportunity cost exists between these two options. It would have been more economical to simply buy the iron off the market (for less) plus save the time and hassle of being an employer.

The point of operating a business is normally to operate with a profit margin or at least some type of benefit. If not, you might as well be using the donate button and run a charity.

Lets suppose our goal as an employer is to have the ability to buy Iron at one cent below what is available at the Marketplace.

Salary = Desired Unit Price x Units Produced

Reviewing the Marketplace, Iron is holding steady at 0.53 cents each. We want to pay one cent less so multiply 0.52 by their given production, skill level 11 would be 102 units. We cross our fingers and hope they are a good employee by working at full health while calculating:

Salary = 0.52 x 102 = $53.04

The opportunity cost of buying off the market in this case would be $1.02 per day or $372.30 per year. This your savings for choosing the right option.

Of course time may be a factor and the Marketplace is readily accessible, therefore the additional cost may be acceptable in such a case.

In closing, I should also point out that when setting your wage, its always safest to build in a safety margin should the market decide to sell for less. Employees don't like to see reductions in wage, but at the same time why rip yourself off?

Signed,



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