Economy and Resources PDF

# Economy and Resources ## Think! What resources are needed to produce goods and services? The economy of a country is defined by the careful management of its resources. Resources are valuable things used to produce goods and services. The more the country produces and sells goods and services, t...

# Economy and Resources ## Think! What resources are needed to produce goods and services? The economy of a country is defined by the careful management of its resources. Resources are valuable things used to produce goods and services. The more the country produces and sells goods and services, the stronger it is economically. The resources of a country can be classified into three groups: natural resources, human resources, and capital resources. ### Natural Resources Natural resources are resources that are found in nature. Coal, aluminum, gold, trees, air, water, soil, and wind are examples of natural resources. They provide the raw materials for production of goods. Raw materials are the basic materials people use to make new products. ### Human Resources Human resources are the people who do the work to make a good or provide a service. Producers look for good human resources because they add value to the workplace. They choose people who have skills and qualifications as they are the ones who create, innovate, and make a difference. A new and modern company is worth very little if its employees are not competent, skilled, and professional enough to keep the company running the right way. It is very important to have a leader who can help employees bring out their best and lead the company towards success. ### Capital Resources Capital resources include the money and the items people use to create goods or services like machines, tools, vehicles, and information. For example, to make vanilla ice cream, factories use vanilla beans, sugar, and special machines. They also need freezers to store the vanilla ice cream and vehicles to take them to the stores. All those items are the capital resources. Natural, human, and capital resources are essential for the economy of a country. Without these resources, producers are not able to make new products and consumers are not able to buy and use everyday goods and services to satisfy their wants and needs. # Scarcity and Trade ## Think! What happens when a country does not have enough resources? Producers try their best to make sure they always have goods and services to satisfy the consumers’ wants and needs. People’s desire to buy goods and services is unlimited, but sometimes the resources are limited, scarce. When producers of a country run out of resources to make goods, they start searching for other countries that have the availability of these resources; thus, they start trading with them. This process is called international trade. ## International Trade International trade is the exchange of goods, services, and resources between countries. It occurs when one country has something that another country wants. Sometimes, countries prefer to trade rather than produce because it costs less. Trade between the Kingdom of Saudi Arabia and China is a great example of international trade. The Kingdom is an oil-rich country. That’s why it exports oil to China. To export is to send out goods, services, and resources to a foreign country. On the other hand, China is a major producer of cars. So the Kingdom imports cars from China. To import is to bring in goods, services, and resources from abroad. Products need to travel all the way from one country to another. That’s why all products are loaded onto cargo ships, container ships, which move across the ocean to reach the designated country. A lot of countries also import and export fruits and vegetables. Due to climatic conditions, fruits and vegetables are sometimes scarce in some countries. They have to be imported from elsewhere. It is always better to buy local products if possible to support local farmers and producers. # Deciding on a Price ## Think! How do producers decide on the right price for their goods or services? Producers put their goods in the market to sell them to consumers in exchange for money. But how do producers decide on the right price for a good or a service? How much money is the consumer willing to pay for it? Producers decide on the price for their goods and services based on supply and demand in the market. - Supply is the amount of goods and services available. - Demand is how much people want the good or the service. When there is not enough of a product on the market (the supply is low), and everyone wants the product (the demand is high), the price of the product becomes high. However, some people are willing to pay for expensive products if they want something very much. When there is a lot of the product on the market (the supply is high), and very few people want the product (the demand is low), the price of the product becomes low. When the supply and demand change, the market price changes accordingly. Many markets are connected. Sometimes, if the price of a good or a service changes, it affects the price of another good or service. For example, cars need fuel to move. If the price of fuel goes up, people would try to think of an alternative for cars. An alternative is something that can be chosen instead of something else. People might choose to ride bicycles, share a car, or even use public transportation to use less fuel. In this case, fewer people will want to buy cars. When the demand on cars is low, their prices become lower too. Therefore, the change in fuel price affects the price of cars in the market. # Starting a Business ## Think! How can you start a new idea of a product and make money out of it? At one point in our lives, we all had an idea of creating a new product and selling it to others. This is exactly how a business starts. A business is the activity of selling and buying goods and services among people. A business can start with a simple idea. You can build a lemonade booth and sell fresh lemonade in your neighborhood, or you can make trendy bracelets and sell them online. The options are unlimited, but the main idea is to produce a good or a service to satisfy the wants and needs of consumers. A person who starts a business and who is willing to risk loss in order to make money is called an entrepreneur. To gain money, you need to pay money first. For example, to sell lemonade, you need to pay for some materials and resources like lemons, water, sugar, ice, plastic cups, a jug, and the booth rental. The amount you pay for the above materials will be the cost; let’s say it is 500 Riyals. You earn money when you sell your lemonade; let’s say you sell all your lemonade for 700 Riyals. To know how much money you have gained, you subtract the money you have paid from the money you have earned. 700 Riyals - 500 Riyals = 200 Riyals Sometimes, the money you earn is less than what you’ve expected. What happens if you sell all the lemonade for 500 Riyals? 300 Riyals? To start a business as an entrepreneur, you must always have the following in mind: - Choose something you are good at. - Make sure people want what you are selling (there is a great demand). - Let people know what you are offering (you tell them in person, send emails, post your product on social media, or print out posters). - Make sure you choose a good price based on the supply and demand.