Introduction to Economic Resources

Economic Resources

• Economic resources (inputs) are used to produce goods and services.
• Land:
  • Natural resources like land area and raw materials.
• Capital:
  • Manufactured resources used for production.
  • Examples include machinery and buildings.
• Labour:
  • Physical and mental work effort.
  • Limited in number and skills.
• Entrepreneurship:
  • Organizes land, capital, and labour.
  • Involves risk-taking.

Basic Economic Problem

• Humans have unlimited wants but limited resources.
• This creates the basic economic problem: resources have to be allocated between competing uses.
• Economics studies how society allocates scarce resources to satisfy unlimited wants.

Choice & Opportunity Cost

• Scarcity forces individuals to make choices.
• Every choice involves a trade-off, meaning that something else is given up.
• Opportunity cost: the cost of any activity calculated as the value of the best alternative forgone.

Basic Economic Questions

• All economic decisions can be summarized in three main questions:
  • What to produce? (The mix of goods and services to be produced).
  • How to produce? (Choosing which factors of production to use more or less of).
  • For whom to produce?(The distribution of goods and services amongst people).

Economic Decision-Making Units

• Consumers/Households:
  • Buyers of goods and services.
  • Economic goal: Maximize satisfaction.
• Producers/Firms:
  • Buy productive resources from factor owners and sell products to consumers.
  • Economic goal: Maximize profits.
• Factor Owners:
  • Owners of factors of production (land, capital, labour, entrepreneurship).
  • They earn income by selling the services of their factors.
  • Economic goal: Maximize income.
• Government:
  • Acts as a guide in economic activities.
  • Formulates and implements economic policies.
  • Economic goal: Maximize social welfare.

Private Goods

• Private goods are rival and excludable.
  • Rival: One person's use of the good diminishes the quantity available for others.
  • Excludable: It's possible to prevent someone from enjoying the benefits of the good.
• Examples: cars, houses, food, and drinks.

Public Goods

• Public goods are produced by the government.
• Examples: national defense, flood-control dams.
  • Non-rival: Consumption by one person doesn't prevent others from benefiting.
  • Non-excludable: No one can be excluded from benefiting once the good is provided.

Positive vs. Normative Statements

• Economics often involves examining the consequences of different economic policies.
• It's important to differentiate between positive and normative statements:
  • Positive statement: A statement of fact that can be tested against reality.
    • Examples: "Unemployment is rising," "The percentage of the population fully vaccinated in my country is over 70%."
  • Normative statement: A statement of value judgment; it involves opinions and values.
    • Examples: "The government should lower the minimum wage," "The percentage of the population fully vaccinated in my country is too low."

This quiz covers the fundamentals of economic resources, including land, capital, labour, and entrepreneurship. It highlights the basic economic problem of scarcity and the implications of choice and opportunity cost. Test your understanding of how these concepts interact in economic decision-making.