ABSTRACT
Economic analysis has been useful in understanding the labor force participation of children and wives, the allocation of time to various nonmarket activities, and family formation. It is frequently asserted that traditional economic principles are of little relevance in underdeveloped countries having large subsistence sectors and small market sectors. The basis of economics is choice, and an economy certainly has many choices among different products, including the choice of how much to set aside for future growth. In addition, prices determine how production is organized. If the price of capital decreased relative to the price of labor, firms would use more capital relative to labor, or if the price of skilled labor decreased relative to that of unskilled labor, they would use relatively more skilled labor. The supply of factors of production is considered—the supply of labor in general and to particular occupations and the supply of nonhuman capital.
