Economics is the study of human behavior, who uses, why we use and how we use
Who decides how scarce resources are used?
The Government, The people and businesses
Public sector organizations are owned by the government and are run by the government.
Private sector organizations are owned and controlled by individuals or groups of individuals.
Economic goods are limited in supply
Examples of economic goods could be oil, wheat and metals
Free goods are unlimited in supply
Examples of free goods are air, sunlight and fruit
The economic problem deals with the issue of scarcity and how best to produce and distribute resources
Opportunity cost is the cost of the next best alternative that is foregone when a decision is made.
The four factors of production are Land, Labour, Capital and Enterprise
Land is natural resources, like oil, coal and water
Labour is Human Resources, which includes skilled and unskilled
Capital is manufactured resources. Machinery, tools and vehicles. Capital includes human knowledge and skills.
Enterprise is the skills a business person requires to combine and manage the other three factors of production successfully
The income of land is rent
The income of labour is wage/wages
The income of capital is interest
The income of enterprise is profit
Factor mobility is the ease by which factors of production can be moved from one place to another.
Occupational mobility is the ability to move factors between one productive task to another. For example, a worker who can move from one job to another.
Geographical mobility is the ease by which factors of production can move from one place to another. For example, oil is a geographically mobile factor because it is relatively easy to transport to different places.
Many workers are occupationally immobile because they have specific skills. For example, a lawyer cannot become a train driver overnight. They need time to gain the specific skills.
Workers may be geographically immobile because they have close family ties and may not wish to leave them.
Workers may be geographically immobile because of the cost of houses, or because moving may be expensive
Moving FOPs to more productive activities from less productive activities will increase their total output of goods and services.
Occupational mobility allows FOPs to move into their best possible uses and not waste resources
Occupational mobility allows firms to change the types of goods and services they produce as human wants and needs change.
Land quantity can be increased by an increase in rent which pushes farmer to release their land into productive uses.
Land quantity can be increased by planting and growing more trees and plants.
Land quality can be increased by fertilizers and better land management which can allow more crops to be grown
Land quality can be increased by new technologies that could improve the resilience of plants to drought and insect infestation
Labour quantity can be increased by an increase in wages.
Labour quantity can be increased by an increase in the population of working age. (Pushing back the retirement age, for example)
Labour quality can be increased by providing good quality education and training which can improve workforce skills and and increase the amount of goods and services being produced.
Capital quantity can be increased by a decision by producers to produce more capital goods.
Capital quantity can be increased by an increase in interest payments which will increase the amount of capital investors are willing to supply to firms
Capital quality can be increased by advances in technology
Enterprise quantity can be increased by an increase in the prices consumers are willing to pay for goods and services which might prompt people to start firms
An increase in enterprise might be because there is a fall in the number of paid jobs and unemployment begins to rise.