Economics

• Workers


  Have limited free time and want to pursue additional training as well as more leisure
• Firm


  Has obtained $100,200 and machinery & also extended its premises (building)
• Government


  Has a budget of 100m and wants to build a new school, hospital and also improve the road network
• The continuing nature of the franamita Problem
• Scarcity has continuing nature. Even if resources will increase, the wants will also increase at a faster pace. Scarcity will continue because wants increases faster than resources
• Scarcity


  If there is scarcity and people cannot satisfy a want, they must make a choice
• Choice


  Implies a selection from different alternatives / wants. People usually arrange wants in order of priority & select the most important wants
• Opportunity Cost


  If we choose to satisfy one want, other alternatives would be sacrificed / given up. In Economics, we measure the cost of having something in terms of forgone alternatives
• Opportunity cost refers to the next best alternative that is forgone
• Example of Opportunity Cost


  • A person uses Rs 1000 to buy a dress instead of a watch. Monetary cost of dress is Rs 1000, Opportunity cost of dress is the watch
• Factors of Production


  Refers to the resources used in production - inputs that create goods and services - outputs
• Factors of Production


  • Land
  • Labour
  • Capital
  • Enterprise
• Land


  Refers to all natural resources that are used in production. It includes all free gifts of nature such as sunshine, winds, water, soil, petroleum, minerals
• Land


  • Some resources are renewable, others are non-renewable. Quantity of land can increase or decrease over time. Quality of land can be improved through technology. Land is generally geographically immobile but occupationally mobile
• Labour


  Refers to the physical and mental efforts produced by workers in the production process. Reward paid for labour is wages
• Labour


  • Quantity of labour can increase or decrease over time depending on demographic factors. Quality of labour can be improved through education, training, better health - leading to human capital build up. Labour can be occupationally mobile and geographically mobile
• Capital


  Refers to the man-made resources that help to produce other goods and services, such as machinery, buildings, vehicles, tools, equipment, computers. Reward for capital is interest
• Capital


  • Quantity of capital can increase when firms purchase more capital goods. Quality of capital can improve through use of technology. Capital is generally both occupationally and geographically mobile
• Enterprise


  It is the risk taking factor that organises the production process. Reward for enterprise is profit
• Enterprise


  • Quantity of entrepreneurs can increase if level of education, skills and incentives are provided. Quality of enterprise can be improved through training. Enterprise is the most mobile of all factors of production
• Economic Goods


  Goods and services that are obtained against payment, therefore a price is paid. They involve an opportunity cost as resources could have been used in other ways
• Free Goods


  Goods or services that are 'free' gifts of nature and their consumption involves no opportunity cost
• Types of Goods


  • Consumer Goods
  • Capital Goods/Producer Goods
  • Public Goods
  • Private Goods
  • Merit Goods
  • Demerit Goods
• Consumer Goods


  Goods and services that directly satisfy people's wants
• Capital Goods/Producer Goods


  Goods that help to produce other goods and services
• Public Goods


  Goods and services that are jointly consumed by everyone and no one would be willing to pay for them. They have the characteristics of non-rivalry and non-excludability in consumption
• Private Goods


  Goods that are individually consumed and for which a price can be charged. They are rival in consumption and excludable
• Merit Goods


  Goods that benefit consumers more than they realise at the time of consumption. Consumers lack information about the true benefits
• Demerit Goods


  Goods that harm consumers more than they realise at the time of consumption. Consumers lack information about the real harm