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Economic Theory

You know that her decision reflects two different factors. The first is
her tastes. Each customer likes different items on the menu. Some love the
spicy fried chicken; others dislike it. There is no accounting for differences
in tastes. The second is what she can afford. She has a budget in mind that

limits how much she is willing to spend on fast food on a given day. Her
decision about what to buy comes from the interaction between her tastes

and her budget. Economists have built a rich and complicated theory of
decision making from this basic idea.
You look back at the counter and to the kitchen area behind it. The
kitchen, you now know, is an example of a production process that takes

inputs and produces output. Some of the inputs are perhaps obvious, such
as basic ingredients like raw chicken and cooking oil. Before you took the
economics course, you might have thought only about those ingredients.

Now you know that there are many more inputs to the production process,
including the following:
 The building housing the restaurant.

 The tables and chairs inside the room.
 The people working behind the cash register and in the kitchen.

 The people working at KFC headquarters managing the outlets in
Paris.
 The stoves, ovens, and other equipment in the kitchen used to cook

the food.
 The energy used to run the stoves, the ovens, the lighting, and the
heat.

 The recipes used to convert the ingredients into a finished product.
The outputs of KFC are all the items listed on the menu. And, you
realize, the restaurant provides not only the food but also an additional

service, which is a place where you can eat the food. Transforming these
inputs (for example, tables, chickens, people, recipes) into outputs is not
easy. Let us examine one output – for example, an order of fried chicken.

The production process starts with the purchase of some uncooked
chicken. A cook then adds some spices to the chicken and places it in a vat
of very hot oil in the huge pots in the kitchen. Once the chicken is cooked,
it is placed in a box for you and served to you at the counter. That

production process uses, to a greater or lesser degree, almost all the inputs
of KFC. The person responsible for overseeing this transformation is the

manager. Of course, she does not have to analyze how to do this herself;
the head office provides a detailed organizational plan to help her.

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