economics chapter 1

• Scarcity in economics is due to limited resources (labor, land, capital, and entrepreneurs) available to satisfy unlimited human wants

  
• Choices must be made about how to allocate resources to satisfy the most important needs
• Renewable resources can be replaced naturally over time (e.g., sunlight, wind, water), while non-renewable resources cannot be replaced naturally (e.g., fossil fuels, minerals)

  
• Different forms of capital include:

  • Physical capital: a truck, a tractor, a hammer
  • Human capital: a factory
  • Intellectual capital: a laptop

  
• Types of labor include:

  • Factory workers on an assembly line
  • Protesters with signs
  • Scientists working in a lab
  • Farmers working in a field

  
• A production possibilities curve (PPC) shows the combinations of two goods an economy can produce with its resources and technology, illustrating the concept of opportunity cost

  
• The PPC demonstrates the trade-off between producing different goods; producing more of one good means giving up some of the other
• Opportunity cost is the value of the next-best alternative that is given up when a choice is made
• Factors of production in economics are land, capital, labor, and enterprise
• Some economists consider enterprise as a special form of labor
• Land includes natural resources used in production, such as the earth, minerals, and what grows naturally on the land
• Labor covers all human effort in producing goods and services, including physical and mental work
• Human capital refers to the education, training, and experience that workers have gained
• The supply of labor is affected by factors like population size, age structure, retirement age, school leaving age, and attitudes towards working women
• The number of hours people work is influenced by factors like the length of the working day, full or part-time work, overtime, holidays, and sickness
• Scarcity in economics: limited resources (labor, land, capital, entrepreneurs) vs. unlimited human wants (food, clothing, shelter, etc.), leading to choices on resource allocation

  
• Renewable resources: can be replaced naturally over time (sunlight, wind, water). Non-renewable resources: cannot be replaced naturally (fossil fuels, minerals)

  
• Types of labor:

  • Factory workers on an assembly line
  • Protesters with signs
  • Scientist in a lab
  • Farmers working in a field

  
• Enterprise in factors of production: role of management, example of an entrepreneur, business manager, and factor income (profit)

  
• Opportunity cost: the value of the next best alternative foregone when a choice is made, illustrated by a boy studying all night instead of sleeping

  
• Production Possibilities Curve (PPC): graph showing combinations of goods an economy can produce with given resources and technology, illustrating opportunity cost

  
• Causes of geographical immobility of labor:

  i. Differences in housing price and availability

  ii. Family ties

  iii. Differences in educational systems

  iv. Lack of information

  v. Restrictions on movement of workers

  
• Enterprise:

  • Involves bearing uncertain risks and making decisions in business
  • Entrepreneurs organize factors of production and bear the risk of losing money
  • Risks can be protected by insurance, but some events are not insured against
  • Education and lower taxes can encourage entrepreneurship
• Opportunity cost:

  • All resources are scarce, decisions must be made
  • Cost of a decision in terms of the best alternative given up
  • Examples of opportunity cost in daily life and business decisions
• Economic goods vs. Free goods:

  • Economic goods involve opportunity cost, limited supply
  • Free goods do not involve opportunity cost, like sunshine or river water
• economics is the social science that studies how individuals, businesses, governments, and societies make choices about using scarce resources to satisfy unlimited wants
• microeconomics focuses on individual decision making by consumers, firms, households, and markets
• Scarcity refers to the fact that there are never enough resources available to meet all human needs and desires.
• The law of demand states that as prices rise, consumers will buy less of a good or service, while if prices fall, they will buy more.
• macroeconomics looks at economic issues affecting entire economies such as inflation, unemployment, interest rates, exchange rates, and international trade.
• factors of production include land, labour, capital, and enterprise
• Supply refers to the quantity of a product that producers can sell at different price levels over time.
• The law of supply states that as prices increase, suppliers will produce and offer more of their products for sale, while if prices decrease, they will produce and offer fewer products.
• labour includes people who work either directly or indirectly with goods and services
• land includes natural resources like minerals, forests, water, and fertile soil
• opportunity costs refer to what must be given up when choosing one alternative over another.
• capital includes machinery, tools, buildings, and other equipment used to produce goods and services
• Microeconomics focuses on individual markets and how buyers and sellers interact within them.
• Efficiency is achieved when society gets maximum output from its scarce resources.
• Equality is achieved when everyone has equal access to goods and services.