Lecture 1: Early Economies PDF

**SECTION 1: THE NATURE OF BUISNESS** **[LECTURE 1: EARLY ECONOMIES:]** ***The Economic Problem***: Our unlimited needs and wants far exceed the limited resources available to satisfy our needs. ***Scarcity***: is the fundamental **economic** problem of having seemingly unlimited human wants in...

**SECTION 1: THE NATURE OF BUISNESS** **[LECTURE 1: EARLY ECONOMIES:]** ***The Economic Problem***: Our unlimited needs and wants far exceed the limited resources available to satisfy our needs. ***Scarcity***: is the fundamental **economic** problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfil all human wants and needs. Scarcity leads to ***Choice***--making a decision between several choices eg. Having to make choices at the grocery store. **Economy**: This is any place or location where economic activity exists i.e consumers and producers interact. Economies also interact with government and the international sector. **SUBSISTENCE ECONOMY:** This occurred amongst early humans whose basic needs and wants were food shelter and clothing. These are called our ***primary needs***. The needs of a village were satisfied from nature only providing for themselves. This is also called ***Direct Production.*** **Division of Labour and Specialisation** Nomadic people settled to different areas such as around rivers they began to specialise in different tasks. **Definition of Specialisation:** This is the focusing of effort on one particular task or product. Specialisation can exist in 6 different ways: 1. **By Product** -- eg. Fish farming, Poultry or Cattle 2. **By Process** -- eg Oil extraction, Refining, By product (Lubricants, Gas) 3. **By Firm** -- eg Microsoft -- Software, Tablets, Cell Phones. Or Google 4. **By Industry** --eg Tourism, Transportation, Agriculture, Extractive. 5. **By Region**- eg Northern Region of Trinidad for Chive 6. **By Nation**- eg Trinidad's Oil, Switzerland's Chocolates, Germany's Automobiles. **Advantages and Disadvantages of Specialisation:** **[Advantages]** 1. Less time to train a person performing one job. 2. Tools are less expensive because the jobs are less complex. 3. Output or production is increased. (Repetitive) 4. Machines can be used to speed up production. 5. Efficiency is improved (Time related) 6. The skill of the worker is improved through repetition 7. Standardised product (lower cost) **[Disadvantages]** 1. Cannot work for niche or small markets 2. Difficult to motivate workers doing repetitive tasks 3. Industrial action is easier to organise and more effective (Workers cannot be easily replaced) 4. Machines allow for individual craftsmanship to be lost. 5. Can be disruption in the chain of production if worker is ill or absent. 6. Occupational Immobility- unable to transfer skills learnt to other jobs. **BARTER:** In simpler economies before the advent of money bartering was used. **Definition:** Exchange (goods or services) for other goods or services without using money. **Disadvantages to Bartering:** 1. **A double coincidence of wants**. Can only exchange if each party desires what the other party has. 2. **Rate of exchange** could be difficult to be decided upon. 3. **Some goods are not divisible**. 4. **Goods are bulky and difficult to transport**. 5. **Store of Value** -- Some goods are perishable and cannot be stored for a long time. **TERMS AND CONCEPTS** **Capital/ Producer goods-** Tangible assets or goods that are used to produce other goods eg. Buildings, Vehicles, Stock, Raw materials **Consumer goods-** are **goods** that are ultimately consumed rather than used in the production of another **good. (Final Product)** **Primary goods-** are those goods that are utilised in the production of consumer goods eg. **Raw materials, agriculture, fishing, farming.** **Consumer -** a person who purchases goods and services for personal use and plays a vital role in the economy. **Free good --** A good that is not scare and available without limits eg. Air, Desert sand, water in the oceans. **Private good-** is defined in [economics](https://en.wikipedia.org/wiki/Economics) as \"an item that yields positive benefits to people that is **[excludable](https://en.wikipedia.org/wiki/Non-excludable_good),** i.e. its owners can exercise [private property rights](https://en.wikipedia.org/wiki/Private_property_rights), preventing those who have not paid for it from using the good or consuming its benefits eg Bread **Public Goods-** These goods are non-exclusive i.e no one individual can exclude another individual from receiving its benefits eg. Roads, Bridges **Merit Goods --** These are goods that when used contributes a benefit to the wider society eg. Education **Demerit Goods --** These goods when used or consumed have a negative impact on the wider society eg. Cigarettes **Labour --** The human mental and physical effort in the production process. **Market --** A mechanism which allows buyers and sellers to interact in their interest eg. Online buying, financial market, commodity market. **Opportunity Cost --** is the value of the loss incurred as the result of the sacrifice of the second best option. **Organisation --** The provision and coordination of the firms inputs to achieve the goals and objective of the firm **Producer --**A person that satisfies human wants by the organisation of resources to produce goods and services. **Profit --** Total Revenue Exceeds total Cost **Loss --** Total Cost of Production exceeds Total Revenue **Service --** Intangible actives that are provided to satisfy human wants eg. Banking, Cleaning, Insurance **Direct Services --** a service that is incurred for their own sake eg. Haircut, repairs. **Indirect Services --** service that is received along with benefiting from a direct service or good eg. Delivery of Pizza **Trade or Exchange --** the exchange of goods and services for money eg international trade. Distinguishable from barter which is exchange of goods for goods. **Commodity** -- This is a good that is traded, usually raw materials or primary agricultural products such as copper or coffee. **Enterprise-** This could mean a business. This is used to describe an undertaking of an activity with some degree of difficulty or risk. This undertaking has specific purpose such as monetary goals. Enterprise can also mean initiative which is daring to do something new or different, challenging or risky. **Entrepreneurship-** The practice of identifying a new innovation or opportunity, organising the financing and other resources and taking the risk in the hope of creating wealth. The entrepreneur is the individual who identifies the opportunity and risks the time and money to start to organise this new adventure. **Trade-** This is the process of buying and selling. Business engage in trade to make a profit.