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ECONOMICS SS1 SCHEME OF WORK FOR FIRST TERM 1. Meaning of Economics; Definition, Scope of economics, Reasons for studying economics - Economics as a science, art or social science 2. Basic Concepts of Economics; Wants, Scarcity, Choice, Scale of preference...

ECONOMICS SS1 SCHEME OF WORK FOR FIRST TERM 1. Meaning of Economics; Definition, Scope of economics, Reasons for studying economics - Economics as a science, art or social science 2. Basic Concepts of Economics; Wants, Scarcity, Choice, Scale of preference, Opportunity cost -Importance of Opportunity Cost as related to Individuals, Firms and Government. 3. Basic Economic Problems of the Society  What to produce  How to produce  For Whom to Produce  Efficient use of resources  How much to consume and save? 4. Basic tools for Economic analysis  Tables, Graphs, Charts- Simple, Component and Multiple Bar charts; Merits and Demerits.  Pictograms, pie charts 5. Data Collection and Presentation;  Formulation of frequency Tables (ungrouped data)  Measures of central tendency; Mean, Median and Mode  Measures of Dispersion or Variation (Ungrouped Data); Range, Mean deviation, Variance and Standard deviation 6. MID-TERMBREAK 7. Theory of Production; meaning, stages, types and factors 8. Land as a factor of production; meaning, features, uses and contributions. Law of diminishing returns 9. Labour as a factor of production; meaning, types and features. Efficiency of labour 10. Capital as a factor of production; meaning, types, features and importance -Entrepreneur as a factor of production; meaning and functions 11. Revision 12. Examinations  DEFINITION OF ECONOMICS The word ‘Economics’ is derived from the Greek word ‘Oikonomikos’ which can be divided into two parts: a. Oikos, which means ‘Home’ b. Nomos, which means ‘Management’. Hence, economics literally means Home management. In this sense, we can observe that the head or breadwinner of a family faces the problem of satisfying the wants of the members of the family. In the same way, an entire society taken as a family tries to cater for the needs of its members. The economic science has been differently defined by several economists. Each of these definitions lays emphasis on a particular aspect or particular aspects of economic activities and phenomena. Economic activities refer to the acts of production, distribution, exchange and consumption of goods and services. All economic activities involve certain elements such as human effort, choice among various alternatives, the use of resources and a system of exchange. The definitions of economics can be classified into three kinds for convenience. These are wealth definitions, welfare definitions and scarcity definitions of economics. Wealth Definitions The emphasis in this category of definitions is on wealth, its creation and its accumulation. Wealth is said to bring prosperity. So, the wealthier an individual or a nation is, the happier he or she is thought to be. Thus, it is important to find out how to be wealthy and economics is the subject which teaches one how to be wealthy. The following are wealth definitions of economics: 1. Adam Smith, in his book titled, The Wealth of Nations in 1776; defines economics as “an inquiry into the nature and causes of the wealth of nations”. 2. John Stuart Mill (J. S. Mill) defines economics as- "The practical science of production and distribution of wealth". 3. Jean-Baptiste Say (J. B. Say) calls economics- "The science which treats wealth", that is, the body of knowledge which relates to wealth. 4. Herbert Joseph Davenport (H. J. Davenport) defines economics as the science that treats the phenomenon from the standpoint of price. Welfare Definitions Here, the emphasis shifts from material wealth to economic welfare or well-being. This is because wealth is only a means to an end, the end being human economic welfare. Economic welfare is synonymous with standard of living. Thus, this set of definitions highlight the importance and the role of the individual in the creation and use of wealth for the sake of human welfare. Definitions under this category include: 5. Arthur Cecil Pigou (A. C. Pigou) who considers economics as a means of studying how total production could be increased in order to improve the standard of living of a people. 6. Alfred Marshall defines economics in these words- "Economics is a study of mankind in the ordinary business of life in earning and enjoying a living. Scarcity Definitions The target of the scarcity definitions is on the efficient allocation and use of scarce resources, that is, finding out the best way to allocate scarce material and non-material resources in order to satisfy human wants. 7. According to Paul Samuelson, “Economics is the study of how people choose to use scarce or limited productive resources to produce various commodities and to distribute them to various members of the society for their consumption”. The most generally accepted definition of economics was given by Professor Lionel Robbins in 1932. He defines economics as the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. Ends refer to human wants and desires which are so numerous that they are said to be insatiable or unlimited. For example, a student needs notebooks, sandals, uniforms etc. these needs are so many and are unlimited. Scarce means are the resources available for use in satisfying our numerous wants. These resources are scarce in relation to human wants. This means that resources are never enough to satisfy more than a few needs at any given time. Examples: money, land, etc. Alternative Uses: The scarce, available means or resources have so many uses to which they could be put. For example, a student who has some money has to choose between the payment of school fees or the purchase of his textbooks and other school needs. The Nature and Scope of Economics Economics is a social science because it studies human behaviour. Other social sciences include sociology, geography, psychology, political science, religious studies, philosophy, anthropology, etc. However, economics studies the material aspect of human behaviour which covers the activities of individuals, households (consumers), firms (producers) and government (the state) in the areas of production, exchange, distribution and consumption of goods and services. The scope of economics refers to the things which are of concern to economics that is what economists inquire about. The scope of economics covers: a. The Subject Matter of Economics: The subject matter of economics tells us how human beings utilize their limited resources for the satisfaction of their numerous wants. Economics has a very wide subject area with many areas of specialization. Among the things which belong to the subject matter of economics, we have the following: Theory of Cost, Theory of Production, Theory of Demand and Supply, Market Structures, National Income, Inflation, Unemployment, Balance of Payment, Money and Banking, Economic Growth and Development, Population, International Trade, Taxation, consumption, production, exchange and distribution. (i) Production: deals with the creation of utility, that is, transformation of goods from raw materials to finished goods that the society will be satisfied. (ii) Exchange is the system of giving something in return for another thing. Distribution is the movement of goods from the manufacturer/producer to the wholesaler, from the wholesaler to the retailer and finally to the final consumer. (iii) Consumption: is the act of utilizing or using a particular good to satisfy your wants. It must be noted that production is not complete until goods get to the final consumer. Economics equally deals with how people react to economic situations and how they behave in their desire to satisfy their unlimited wants with scarce resources as they go about their daily economic activities. It deals with the administration of scarce resources. (iv) Distribution: This deals with the act of sharing all that is produced in the economy. b. Economics is a social science: It is a social science because it studies how man interacts with the economic activities in his environment, what man produces and does not consume and also what man consumes and does not produce. When man produces more, he has to sell the excess quantities. Similarly, he has to buy goods which are not produced by him. c. Whether Economics is a Science or an Art Subject: Economics is a science because it is a systematized body of knowledge. A branch of knowledge becomes systematized when relevant facts have been collected and analyzed in a manner that we can trace the effects back to them. Also in Economics, many laws and principles have been discovered and hence it is treated as a science. d. Whether Economics is a Positive Science or a Normative (Prescriptive) Science: Economics distinguishes between positive economics and normative economics. Positive economics deals with “what is”, “what was” and “what will be”. In other words, positive economics is concerned with what actually happened in the past, what is happening currently and what is expected to happen in the future based on past and current trends. Positive statements can be tested. Thus, they are measurable and verifiable. For instance, the statement that Nigeria’s economic growth rate was 7% belongs to the category of positive economics. Its accuracy can be assessed by examining relevant data. By contrast, normative economics deals with opinions which cannot be tested, measured or verified as right or wrong. Normative economics deals with subjective value judgments of what ought to happen or what should happen. In other words, normative economics is prescriptive. For example, the statement that the Nigerian government should spend more on education is a normative statement. Economics is both a positive and a normative science because it deals with both what actually happen and it prescribes what should happen. Branches of Economics Economics has several branches or divisions but the two most important of them are microeconomics and macroeconomics. Microeconomics is the branch of economics which is concerned with the decision-making of individual or single units of an economic system such as individuals, households, firms and government. Macroeconomics, on the other hand, deals with the things which pertain to the economic system as a whole, that is, the aggregate or overall economy. These things include unemployment, inflation, national income, exchange rates etc. Other branches of economics include: Monetary economics, Managerial Economics, Development economics, Business economics, Econometrics, Political economics, Mathematical economics, Labour Economics, Environmental Economics, Behavioural economics, Welfare economics, Energy economics, Health economics, Pure economics and Applied economics. Why we study Economics 1. We study economics because it teaches us how to make efficient and rational use of scarce resources to satisfy our wants. 2. It offers firms and the government a rational guide in the allocation of scarce resources. 3. It guides our national planners and policy makers to plan for economic growth and development. 4. The study of economics helps to solve the problems of what, how and for whom to produce. 5. It helps the individual to build up a body of economic principles which equips them with tools for economic analysis. 6. It enables individuals to make useful contributions to increase the well-being of society. 7. Choice-Making: Economics is a science of choice because it deals with the efficient allocation of scarce resources so as to satisfy human wants. It seeks to choose the most pressing human wants to satisfy, given limited resources, in order for the individual and society to obtain maximum satisfaction. 8. Preparing for a Practical Future: The study of economics is a preparation for a gainful employment in life and it helps one to choose a future career. 9. Economic Growth and Development: The study of economics enables the government to plan towards increase in economic growth and development. 10. National Income Estimate: The study of economics equips us with the knowledge of proper and adequate estimates of the national income of a country. 11. The study of economics also helps students to have a better understanding of the aims, consequences, objectives, methods and limitations of government policy. 12. Economics helps traders and business people to maximize their profits using economic principles for their businesses. It also guides those who want to venture into business in the future. Economics as a Science and Social science Science is a knowledge arranged in a systematic and orderly manner, especially knowledge obtained by observation of facts and testing them. A branch of knowledge is said to be systematized when relevant data and facts have been gathered and analysed in a manner whereby effects can be traced back to their prevailing causes. Sciences also make use of theories, principles and laws which guide their operations and their methods of inquiry. These laws are universally or generally accepted. The laws guiding science are tested and based on experiments which have been repeatedly conducted. Scientific facts can be subjected to tests which serve either to verify or falsify them. Science is also able to make future predictions based on past trends. In addition, scientific phenomena have scales of measurement. The attributes of science are observation, investigation, classification and generalization and application.  Economics is a science because it equally adopts these scientific attributes in its study of human behaviour as well as the explanation and observation of phenomena and the prediction of future events. However, economics is not a natural or pure science but a social science like sociology, psychology and political science. It deals with human behaviour in the ordinary business of life in order to efficiently utilize scarce resources. This is because man human beings deal with and interact among themselves in the process of buying and selling Differences between Economics and other Sciences Economics Other Science Subjects 1. It belongs to a group called social science. Like physics, chemistry and biology belong to the area of physical, natural or pure sciences. 2. It studies human beings and their behaviour. Pure sciences like physics study mainly inanimate objects. 3. Economics can never isolate its objects of study. Pure sciences isolate their objects. 4. It does not have a defined laboratory and uses no specific apparatus. Pure sciences have defined laboratories and specific apparatuses. 5. It does not arrive at definite or precise conclusions. This is human Pure sciences will arrive at behaviour is complex and unpredictable. Human behaviour changes from time to definite conclusions and rigid time depending on the circumstances. It is not always consistent and so it cannot laws. be subjected to rigid, unbending laws. Reasons why Economics is a Science 1. It makes use of scientific methods of observation, investigation and conclusion like other sciences. 2. It is empirical in its approach to problems as the other sciences. 3. It predicts human behaviour as seen in their group or inter-personal dealings. 4. It uses quantitative techniques through data collection and observation. 5. It has laws and theories like other sciences. For example, laws of demand, supply and diminishing returns etc. Economics as an Art Art is the practical application of knowledge or scientific theories, laws and principles for achieving particular goals. Art can also be described as a manipulation of human skills in order to achieve a desired result. Hence, while science concerns itself with obtaining knowledge, art deals with taking practical action or turning principles into reality. Despite the many similar qualities which economics shares with science, it is also considered an art because of the following reasons: 1. Economists suggest policies along with their implementation procedures in order to solve economic problems. In other words, having identified and analysed economic problems, suggestions are made as to how they can be tackled and people use different means to act upon these suggestions in order to achieve a desired result. Ultimately, in responding to economic problems, people use their creativity and this belongs to the realm of art. 2. Economics is unable to establish precise cause and effect relationships between phenomena. There is no exactness or certainty in economic predictions. At best, economics is able to show when there is a high degree of correlation or relationship between phenomena. For example, the law of demand only serves to  establish that there is a strong negative relationship between price and quantity demanded. However, it cannot establish that an increase in the price of a good is the sole cause of the fall in the quantity of that good demanded. This is why economists make use of the ceteris paribus (other things remaining equal) condition. 3. Economics theories are not testable and there is no way to measure the truth or correctness of economic theories. Human actions are not easily measurable, the variables which determine economic activity are not easily determinable and experiments are not exactly possible. 4. Economics sometimes makes use of assumptions which are not supported by evidence. For example, one of the underlying assumptions of economics is that human beings are rational creatures who always seek to maximize their satisfaction. However, economics is unable to account for the many patterns of human behaviour which are irrational. These include economic decisions which are made on the basis of uncertainty, sentiments, emotions and speculation. In conclusion, economics is said to be a science in its methodology but an art in its application. Basic Economic Concepts The following are the basic concepts if economics: 1.Scarcity: This simply means “limited in supply”, that is, resources used to make goods and services needed by consumers are limited in supply relative to the demand for them. People’s wants are unlimited but the resources, that is, the factors of production required for the production of things to satisfy these needs are limited. Economically, resources such as money, materials, time, productive resources, etc. are scarce relative to people’s demands. 2.Choice: Choice involves decision making. This means selecting one out of a number of alternatives because of its relative importance to the person and scarcity of resources among alternative wants. Choice may also involve the allocation of economic resources among alternative wants. Choice is relevant to all the economic units or agents of society. 3.Wants: This refers to all things desired by men or enterprises which can satisfy their desires but are insatiable. Wants therefore are human desires for goods and services. Human wants may be tangible/material or intangible/immaterial. Human wants include the desire for food, clothing, houses, cars, services of doctors, teachers etc. Wants vary from one person to another. They change over time, hence, they are said to be unlimited. Wants differ from needs and from demand. Needs are the things which people require in life which are necessary or fundamental to their existence. This is because a lack of these needs or a failure to fulfil one’s needs may be dangerous or threatening to the life of a person. Without some basic needs such as food, shelter and clothing human beings may not survive. Wants, unlike needs, are not absolutely necessary or fundamental to human existence and people can survive even if some of their wants are not met. Wants are also different from demand in the sense that want involves the willingness or desire to acquire one thing or the other. However, wants are not backed up by purchasing power. Purchasing power refers to the ability of a person to pay for or buy a good or service at a given point in time and at the prevailing market price. Demand, then, is the willingness of a person to acquire a commodity backed by his or her ability to pay for it. Demand becomes effective when one’s willingness to have something is supported by his or her ability to purchase it. Thus, wants can be referred to as ineffective demand. 4.Scale of Preference: This refers to the arrangement of one’s wants in order of priority and importance. In other words, it implies the arrangement of wants in such a way that the most pressing come first. It should be noted that the concept of the scale of preference makes choice-making easier as wants are prioritized when they are more than two. The need to construct a scale of preference is necessary because of scarcity of economic resources and the necessity of choice.  REASONS WHY SCALE OF PREFERENCE IS NECESSARY (a) The scale of preference is necessary because of unlimited resources of individuals, as a result one need to maximize satisfaction with little resources available. (b) Choice making: Human wants are unlimited but the resources to satisfy those wants are limited, hence, there is need for choice. (c) Identification of highest priority: Scale of preference assists individuals to identify quickly the most important needs among others. (d) Efficient utilization of resources: Utmost utilization by the consumers. Scale of preference enable firms to produce the correct goods for utmost utilization by the consumers. (e) Scale preference is necessary because it assists individuals in managing their resource allocation. (f) It is important in aiding choice making by individuals, firms and government. 5.Resources: These are the means by which human wants can be satisfied. Also, they are the means required in the production of services in order to create utility for the satisfaction of human wants. They are therefore referred to as productive resources. The factors of production are land, labour, capital and entrepreneur. There are two types of resources. These are: -Economic resources -Non-economic resources Economic resources are the resources that are relatively scarce and are exchangeable because they have monetary value (price) and are measurable in quantitative terms. They also have economic value (quality). They are also regarded as assets which are categorized into human and non-human assets. Human assets are otherwise called human resources which are labour and entrepreneur while non-human assets are known as non-human resources. These are land and capital. Non-economic resources are the resources which are not scarce and not exchangeable as they are inexhaustible. They have no rival in consumption, no real money value and they are not measurable in quantifiable terms. Non-rivalry in consumption refers to a situation where no one else’s consumption of a particular natural good or resource can affect another person’s consumption of the same natural resource. For example, air, rain, sun etc. Non-economic resources are free goods. 6.Opportunity Cost: This is the alternative foregone or sacrifice made in order to satisfy another want. It refers to the need that is left unsatisfied in order to satisfy our more pressing needs. It is called real or true cost. For example, suppose a student has N2500 at hand at the time he needed to buy the items below: Items Needed Prices (#) Exercise books 500 Biros 100 Textbook 1500 From his scale of preference, he can afford to purchase only the exercise Maths set 400 book, biros, textbook and math set as a result of the limited cash available to Sandals 2000 him, which is #500. The cost of the exercise book, biro, textbook and math set Shorts 500 that are bought are the sandals which could not be purchased. This is known as the alternative foregone, opportunity cost or real cost. Relevance of Opportunity Cost Opportunity cost means the alternative foregone or sacrifice made in order to satisfy another want. It refers to the need that is left unsatisfied in order to satisfy another more pressing need. Human wants are many while the means of satisfying them are scarce or limited. We are therefore faced with a problem where we have to choose one good and forego the other. The alternative foregone is termed opportunity cost (real cost or implicit cost). 1.To Individuals i.Rational Choice: Opportunity cost enables individuals to make wise choices among competing wants. It helps the individual to choose which of his wants to satisfy and which ones to leave unsatisfied. It also helps him to decide which job to take among different opportunities and whether to work or to enjoy more leisure. ii.Efficient Use of Scarce Resources: It also assists individuals in making good use of scarce resources relative to their unlimited wants. 2.To Firms i.Rational Decision: It assists firms to make rational decisions about their production process. Firms have to decide what goods to produce and in what quantity to produce. ii.Technique of Production: It also helps manufacturing industries in deciding the technique of production to employ. In other words, whether to adopt a capital or labour intensive method of production. 3.To the Government i.Preparation of Budget: Opportunity cost helps the government in the preparation of budgets since it assists in the efficient allocation of scarce resources to certain sectors of the economy. ii.Decision Making Process: It helps the government in making certain decisions. The government can prioritize areas that may be requiring immediate attention such as healthcare, education, etc., given their importance to the economy. In making such a decision, the government will have to forego other areas such as infrastructure due to scarce resources. Difference between Opportunity Cost and Money Cost Opportunity cost refers to the foregone alternative or the sacrifice in terms of another good or goods which an economic agent makes in order to satisfy a particular want. It is the satisfaction of one want at the expense of another. In other words, it refers to the wants which are left unsatisfied in order to satisfy more pressing wants. Opportunity cost is the definition of cost according to economists. It is also called TRUE COST OR REAL COST. On the contrary, money cost describes the total amount of money which is spent in order to acquire a set of goods and services. Stated differently, money cost is the total money value of all the goods and services which one purchases. Money cost is the definition of cost according to an accountant. The Origin of Economic Problems Economic problems are common to all countries of the world and they are: 1. What to produce and in what quantity 2. How to produce 3. For whom to produce 4. Efficient Use of Resources 5. Are resources being fully utilized 6. How much to consume or save for investment? A great deal of economic problems arises as a result of scarcity of resources and that is why economists always attempt to tackle the problem of scarcity of resources. Resource allocation is a fundamental root cause of these basic economic problems. Since economic resources are scarce, economists globally have to make vital decisions on how to allocate resources to help in enhancing the growth and development of any economy. All societies and forms of economic or political systems are confronted with the same basic economic problems which are explained below: 1. What to Produce and in What Quantity This is related to production. Decisions would have to be made about what kinds of goods and services to be produced and in what quantities. Since resources are scarce, what to produce will be those goods and services which are very much in demand by consumers. For example, a decision could be taken in a place to produce a cash crop such as cocoa and a food crop such as rice, given the available resources. This problem is solved by each economic system in its own way. In a free market or capitalist economy, the question of what to produce is answered by the interaction of the market forces of demand and supply, that is, private individuals who act as buyers and sellers. The aim of these private individuals is to make profit. On the other hand, in a command or centrally planned or socialist economy, the government determines what and what is to be produced. The focus of the government is the provision of essential goods and services in order to raise the standard of living of the people. In a mixed economy, the choice of what to produce is jointly determined by the government and market forces. This implies that the market determines some of the goods and services produced within the economy while the government also decides on some of the goods and services which will be produced in the economy. 2. How to Produce Having decided on what to produce, another fundamental problem is how to produce. That is, what method of production should be adopted? This problem arises because there is more than one possible method or technique of production. There are two main modes of production in every economy- Capital intensive and Labour intensive modes of production. The capital intensive mode relies mostly on machines and equipment for production with less of human effort being used. On the other hand, the labour intensive mode of production involves a heavy dependence on human effort. So, for example, an economy may decide to adopt either a capital intensive method, employing more machines than labour or a labour intensive method, employing more labour than the use of machines in the production process. However, choice becomes an issue in this situation because it is difficult to adopt both methods at the same time. The choice between labour and capital intensive modes of production depends on several factors such as the level of technological development of the country, the relative cost of the factors of production, government policy, etc. 3. For Whom to Produce This problem has to do with the class of society that should enjoy the goods and services to be produced. In other words, it deals with the types of consumers and methods of distribution of goods and services. The issue here is whether distribution should be focused towards certain people or whether everybody should be treated the same. The problem arises because of the variations of the income groups in an economy. Always, the question is, “Should the goods be produced for the rich class or for the poor masses?” Actually, each commodity produced in an economy will definitely have its primary consumers. Assuming the choice of society is to produce luxuries i.e. goods that are primarily consumed by the rich class, the opportunity cost is the goods that should have been produced instead. Again, the answer to this question is determined by the prevailing economic system. In a capitalist economy, production is done for those who can afford to pay for the goods and services. This implies that the prices of goods and services determine those who are able to access them. This system allocates goods and services to the individual according to his or her ability to pay. In a socialist economy, there is usually a quota system through which the central agency or marketing board regulates or controls the amount of each commodity. This is done in order to ensure that the rich do not buy off all the available goods and leave little or nothing for the poor. The prices of goods and services are controlled and determined by the government and they are placed at a level which is affordable to everyone. This system allocates goods and services to the individual according to his or her need. Finally, in a mixed economy, there is a mixture of capitalist and socialist principles. For commodities considered to be luxury goods, the government does not intervene but allows the market to determine who gets them. On the contrary, for commodities considered to be essential, the government intervenes by fixing prices above which no seller is expected to sell. 4. Efficient Use of Resources One outstanding economic problem of the society is how best to use the available resources. This gives rise to the issue of efficiency in the use of resources. Efficiency refers to the use of the available resources to generate maximum satisfaction or utility with respect to human needs and wants. Efficiency in the use of resources is measured in terms of the amount and quality of goods and services produced by using a given amount of resources. Mathematically, Efficiency = Output of goods and services /Input of Resources or Factors of production The more efficient the use of resources in a country, the better the lives of the citizens of the country. Production is inefficient if a reallocation of productive resources would result in the production of at least one more unit of one good without a corresponding decrease in the production of another good. Again, goods and services are efficiently allocated if redistribution of such goods and services will make at least one person better off without leaving anyone worse off at the same time. If resources are efficiently used, then it would be possible to increase the quantities of all goods and to make everyone in the country better off. 5. Are Resources Fully Utilized This problem can also be termed Full Capacity Utilization of Resources. It deals with the ability of an economy to make use of all its available resources, that is, an economy’s capacity to achieve full employment of available resources. This implies that there will be no idle money/funds, machines or labour. 6. How Much to Consume and Save for Investment? One basic question which has to be answered by society is, “Should less be consumed at present so that the future consumption would be higher?” If less is consumed now, more will be available for investment. This would increase the productive capacity of the economy. On the other hand, if more resources are being utilized at the present time, less will be available for saving and investment. The capacity of the economy to produce would not increase in the future. Society, therefore, is to decide whether to consume more resources at present and less in the future or less at present and more in the future. Basic Tools for Economic Analysis In order to analyze some problems accurately in economics, we must be familiar with some basic tools like tables, charts, pictograms, etc as well as other quantitative techniques especially in statistics and mathematics. Tables A table is a set of systematically arranged and classified figures presented in a form that easily conveys a message to the reader. In a table, data is systematically arranged in columns and rows. A table serves as the most commonly used tool in economic analysis. Features of a Table 1. It must have a title or heading. 2. The units of measurement used in the table must be clearly shown. 3. The source of the information in the table should be stated. 4. It should be very simple and easy to understand 5. It should show the purpose of construction. 6. It must have sub-headings for the rows and columns. Importance of Tables 1. They help in a systematic/orderly arrangement and presentation of data in rows and columns. 2. They make data or qualitative information easy to understand. 3. They help to make the interpretation of data easy for decision-making. 4. They make comparison of figures or different classes of data easy. 5. They provide information used in drawing graphs and charts. 6. They make it possible for required figures to be more easily located. 7. They help to summarize the data presented. 8. They help to bring out the important features in the data. Disadvantages of Tables 1. They may not easily be read by everyone since they sometimes require mathematical knowledge. 2. Due to simplification of data, a table may give minor errors.  Charts Charts are drawings used in representing statistical data. They can be rough sketches or accurately measured and constructed drawings used in the representation of statistical data. Charts can be drawn in various shapes and forms. These include: Pictorial charts, Histograms, Pie charts, Bar charts- Simple, Component and Multiple bar charts. IMPORTANCE OF CHARTS i. ☻☻They show relationships between variables. E.g. volume and production time. ii. They show the trend of change of variables vividly. iii. Diagrams or pictures aid the illustration of economic concepts. PICTOGRAMS A pictogram, which is also known as Pictograph, is a method of using pictures or drawings to present statistical data for easy understanding. The pictures are drawn to a definite scale to represent a given value of data in such a way that the number of pictures would determine the total value of the data being represented. For example, this pictogram shows the population of three hypothetical African countries for the year 1987. If country A has 40 million people, country B has 60 million people and country C has 30 million people; it can be represented in a pictogram as follows. Country A ☻☻☻☻ = 40 million Country B ☻☻☻☻☻ = 50 million Country C ☻☻ = 20 million Note: ☻ = 10 million people. Graph A graph can be defined as a diagram showing the vertical relationship between two variables. There are different types of graphs and they include Line graph, Bar graph, etc. Line graphs can be straight line graphs or curved graphs. Curved graphs are also known as non-linear graphs. In economics, graphs are usually called curves since curved graphs are more common. Hints on how to draw a graph 1. The graph should have a title which should be clearly stated. 2. It should be properly labeled, that is, the horizontal (x-axis) and vertical (y-axis) as well as the point of origin must be indicated. 3. The units of measurement of the variables of the graph should be indicated. 4. The variables on each axis should be stated. 5. An appropriate scale should be used and indicated. Importance of Graphs Graphs help to show the relationship between two variables. 1. Economists use graphs for economic analysis. 2. Graphs give a clearer and quicker impression about quantitative information presented in a tabular form. 3. Changes in variables are easy to understand and analyze with the use of graphs. 4. They are used to solve equations which represent mathematical relationships. Pie Charts A pie chart is a simple circle divided into sections with each section proportional to the corresponding size of degree. The circle represents the total data and with the help of a protractor, the degrees of values are successfully carved out. A pie chart can also represent data in percentages. Example: Composition of a Country’s Population Children 0-17 years 30 million Working population 40 million Old people 10 million Present the above information in a pie chart. Solution: Total = 30m + 40m + 10m = 80 million Children 0-17= 30/80 x 360/1 = 1350 Working Population = 40/80 x 360/1 = 1800 Old People = 10/80 x 360/1 = 450 Composition of a Country's Population 45 135 Children 0-17 Working Population Old People 180 Simple Bar Chart This is a way of representing tabulated data using evenly-spaced bars of equal width, separated by gaps. In other words, the bars stand independently of each other. The lengths of the bars are proportional to the corresponding frequencies. For example: Draw a simple bar chart to show rubber production in Nigeria from 2000-2007. Year Rubber Production 2000 7.0 2001 1.5 2002 3.0 2003 6.0 2004 8.5 2005 5.0 2006 4.0 2007 3.5 Scale: x-axis: Let 1cm represent 1 unit on the graph Y-axis: Let 1cm represent 1 unit on the graph Rubber Production 9 8 7 6 5 4 Rubber Production 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 Note: A simple bar chart is used when the data involved is just one variable. Component Bar Chart A component bar chart is used when the data involved is mainly two or more variables. In drawing a component bar chart, it is important to note that the length of the bars must be proportional to the total value of each class of data being represented. Each bar is then divided into the various segments that make up the components e.g. number of boys and girls in 4 selected classes of a school. For instance, draw a component bar chart from the table below showing the number of boys and girls in four selected classes of a school. Classes Boys Girls Total SS1A 19 13 32 SS1B 23 17 40 SS1C 25 20 45 SS1D 24 11 35 A Component Bar Chart showing boys and girls in 4 classes of a school. Scale: Let 2cm represent 10 units on the y-axis. Let 2cm represent each class on the x-axis.  100 90 80 70 60 TOTAL 50 GIRLS 40 BOYS 30 20 10 0 SS1A SS1B SS1C SS1D Multiple Bar Charts This is a type of bar chart which is used to show that two or more variables vary. It has multiple bars, on each of which stands for components of the variable. For example: Draw a multiple bar chart of the population of three regions shown in the table below. Section 1985 1986 1987 East 30,000 40,000 50,000 West 40,000 30,000 60,000 North 50,000 70,000 40,000 Scale: Let 4cm represent 10,000 units on the y-axis. Let 1cm represent each section on the x-axis.  80000 70000 60000 50000 EAST 40000 WEST 30000 NORTH 20000 10000 0 1985 1986 1987 Multiple Bar Chart showing Regional Population of a country from 1985-1987. Histogram Histogram can be defined as the chart of frequency distribution. It is the most common type of graph for showing classified grouped data. The basic property of histogram is that the area of a given rectangle is proportional to the frequency of the corresponding class. Histograms also have their rectangles or bars at the centre of the class mark (mid-point) of each class. In drawing a histogram, there is no gap or space between any two bars, unlike the bar chart. The values of the variables are scaled along the x-axis while the frequencies are scaled along the y-axis. The first rectangle in a histogram usually touches the vertical axis. Example: Draw a histogram of the data presented below. Number of Days 1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 Tubers of Yam 4 12 7 20 2 9 1 5 A histogram showing the tubers of yam harvested Scale: Let 1cm represent 1 unit on the x-axis. Let 1cm represent 1 unit on the y-axis.  25 20 Tubers of Yam 15 10 5 0 6-10 11-15 16-20 21-25 26-30 31-35 36-40 1-5 Number of Days Line Graph: A line graph can take any pattern depending on the data on which it is based. For instance, the graph below is upward sloping from left to right. 90 80 70 60 50 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 Data Collection and Presentation Formulation of Frequency Tables Frequency distribution is the tabulation of a given collection of data in order with the frequency attached to each value or group of values of a variable which occurs. It is also the number of times which a particular observation occurs. For example, the number of oranges picked by each student was recorded as follows: 1,2,5,3,0,4,3,4,1,2,1,2,1,3,0,2,1,2,3,2,3. Summarize these in a frequency table. The table is presented below: Number of Oranges Tally Frequency 0 || 2 1 |||| 5 2 |||| 6 3 ||||| 4 4 || 2 5 | 1 Total ∑f = 20 Note: A frequency distribution can be for grouped or ungrouped data. Measures of Location or Central Tendency (Ungrouped Data) Measures of central tendency represent the single value which can easily be described as typical of a certain set of data. They possess features which are fairly typical or representative of the population in some ways. Measures of central tendency can be regarded as averages too. The different types of measures of central tendency are: 1. Arithmetic mean or Mean 2. Median 3. Mode They can also be referred to as Measures of Position. 1. Arithmetic Mean: This is the sum total of all items divided by the number of items in the group. It is the most widely used of all the averages. For example, in five consecutive tests, a student scored 13,17,18,18 and 10. Calculate the mean mark. µ = ∑x/n = X1 + X2 + X3 + X4 + X5 + … + Xnn µ = 13+17+18+18+10= 76 µ = 76 = 15.2 5 However, for a large number of items, a frequency table can be used in determining the frequency of each item. The frequency of an item refers to the number of times which a particular item occurs in a distribution. Arithmetic mean can thus be calculated using the formulae: µ = ∑fx or µ = ∑x or µ = ∑fx where ∑f = n. ∑f n n For example, suppose we have this set of numbers: 1,1,1,2,2,2,3,4,3,1,5,5,5,2,1,3,3,2,2,1. Find the mean. x Tally F Fx 1 ||||| 6 6 2 ||||| 6 12 3 |||| 4 12 4 | 1 4 5 ||| 3 15 f = 20 fx = 49 µ = ∑fx = 49 = 2.45 ∑f 20 Advantages of Arithmetic Mean 1. It is the most representative of all the averages. 2. It is very easy to understand and calculate. 3. In view of the fact that it is a calculated average, the mean is always definite/exact. 4. It makes use of each and every item in the series. 5. It is useful for further mathematical and statistical calculations such as the calculation of mean deviation, variance and standard deviation. 6. It is a good standard for comparison. Disadvantages of the Mean 1. It cannot be obtained graphically. 2. It may not relate to the items of the distribution when dealing with discrete data. 3. One or more values can affect the result. In other words, it is affected by extreme values. 4. It is very difficult to determine its value from frequency tables and diagrams. 5. It is difficult to obtain without calculation. 6. It cannot be obtained if there are missing values in the series. Median The median of a set of numbers is the middle number of the given frequency when the numbers are arranged in ascending or descending order of magnitude. It can also be defined as the central or middle value in a given population. The formula for finding the median is M = [ N+12]th term or item. Where M is the median term N is the number of terms or items. For example, the following are the marks obtained by a student: 5,8,4,5,7,6,5,3,9. Find the median. In order to find the median, first, arrange the numbers in either increasing or decreasing order. This gives the following: 3,4,5,5,5,6,7,8,9 Next, pick the number which occurs at the middle of the arranged distribution. Therefore, the median is 5. However, if it is an even set of numbers, the two middle numbers are added and divided by 2. Thus, if the two middle numbers are n and n+1, then Median = n+n+1 = 2n+1 2 2 Advantages of Median 1. It is easier to determine than the mean especially from a small group of data. It can be easily determined. 2. It gives a good idea of the distribution of the data. 3. It is simple to understand. 4. It can be obtained graphically using the cumulative frequency curve or ogive. 5. It is not affected by the magnitude of extreme values. 6. The median can be obtained even if the values of the items are unknown but when the middle item and the total number of items are known. Disadvantages of the Median 1. It may require a rearrangement of the data in order of magnitude which may not be easy. 2. It does not represent a true average of the set of data. 3. It ignores very large or small values. 4. It is not suitable for further algebraic or mathematical analysis. 5. Median is not likely to be representative if the items are few. 6. It cannot be used to determine the total value of all the items. Mode The mode is the most frequent set of values. It is the number or item that appears most or that has the highest occurrence. The mode is the observation for the value which has the highest number or frequency of occurrence. For example, given the following set of values, find the mode. 1,1,2,2,1,3,1,3,2,1,2,1. The mode is 1 because it is the value of highest frequency. Advantages of the Mode 1. One of the actual values is often chosen to represent the majority. 2. It is easier to compute even with a large set of numbers. 3. It is easy to understand and identify from a given set of data. 4. Extreme values do not affect the mode. 5. It can easily be computed when the entire data is given. 6. It can be computed even if the series is not complete. Disadvantages of the Mode 1. At times, we can have more than one mode in a set of data, which does not make it unique. 2. All values in the data are not taken into consideration when computed. 3. There may be uncertainty in its exact location. 4. It is always difficult to determine with precision from a grouped data. 5. It is not very useful for further mathematical and statistical analysis. 6. It lays too much emphasis on the modal group or item at the expense of other items in the distribution. 7. It is not possible to obtain a mode if all the values in a set are unique and unrepeated. Measures of Dispersion/Variation/Scatter Measures of dispersion attempt to illustrate the extent to which the values in a distribution spread about an average. It gives an idea about the non-uniformity or non-conformity of the items in a series. Range The range of a particular set of numbers is the difference between the highest value and the least or lowest value. It gives the limits within which the items in a distribution fall. For example, given the set of data 2,3,4,9 and 13; find the range. Range = Highest value – Lowest value Range = 13 – 2 = 11. Advantages of the Range 1. It is very easy to calculate. 2. It is used in industrial quality control where the range of each batch of production is calculated to determine its variability. 3. It helps in the study of variations in rates of exchange. Disadvantages of the Range 1. It is not a precise measure of dispersion. 2. It depends only on the extreme values and is not based on all the items in a series. 3. It does not give consideration to the arrangement of values in the series. 4. It is not useful for further statistical or mathematical analysis. 5. It is greatly affected by extreme values. 6. It is subject to fluctuations from one sample to another.  Mean Deviation or Mean Absolute Deviation If we have a set of data with a given number of observations and a well-known arithmetic mean from the set of data, we can calculate the mean deviation as: MD = ∑|x-µ| or |d| n n Where ∑ = Summation x = Values in the given data µ = Arithmetic mean n = Total number of values in the given data. Example: Find the mean deviation of 3,4,5,6 and 7. x x- µ | x- µ| or d 3 3-5 = -2 2 4 4-5 = -1 1 5 5-5 = 0 0 6 6-5 = 1 1 7 7-5 = 2 2 ∑|x-µ| = 6 MD = 6 = 1.2 5 Variance This is the square of the standard deviation or it is the average of the sum of the squares of the mean deviation. s2 or δ2 = ∑(x-µ)2 n Standard Deviation This is the square root of the variance. d2 s or δ = √∑(x-µ)2 n Example: Find the variance and standard deviation of 3,4,5,6 and 7. x x- µ (/x- µ/)2 3 3-5 = -2 4 4 4-5 = -1 1 5 5-5 = 0 0 6 6-5 = 1 1 7 7-5 = 2 4 ∑(/x-µ/)2 = 10  Variance (s2 or δ2) = ∑(x-µ)2 = 10/5 = 2 n Standard Deviation (s or δ) =√ ∑(x-µ)2 = √2 = 1.4 n Formulae Mean Deviation MD = ∑|x-µ| Ungrouped Data n MD = ∑f|x-µ| Grouped Data ∑f Variance (s2 or δ2) = ∑(x-µ)2 Ungrouped Data n (s2 or δ2) = ∑f(x-µ)2 Grouped Data ∑f Standard Deviation (s or δ) = √∑(x-µ)2 Ungrouped Data n (s or δ) = √∑f(x-µ)2 Grouped Data ∑f Mean µ = ∑x Ungrouped Data n µ = ∑fx Grouped Data ∑f Examples 1. Solve for the mean deviation, variance and standard deviation for the following set of values: 6,6,6,6,7,7,7,7,7,8,8,8,8,8,8,8,8,9,9,9,9,9,9,9,9,9,9,9,10,10,10,10,10,10,11,11,12,12,12,12. 2. Construct a frequency table for the marks scored by 35 economics students in SS3 Mock examination. Use the frequency distribution to find the mean, median, mode and range. :24,10,14,6,20,20,20,8,20,24,6,14,24,14,10,20,14,10,20,24,10,4,24,20,20,24,10,4,6,20,20,24,10,14,6. Theory of Production Meaning of Production Production can be defined as any activity that results in the creation of goods and services which satisfy human wants. It involves the creation of utility. In other words, production is the creation of wealth in the form of goods and services which can satisfy human wants. Production is not restricted to the creation of tangible or material goods. It also involves services such as teaching, medical, legal, financial and other forms of service. Stages/Forms of Production The types of production refer to the systems, stages or modes of production. This is sometimes referred to as the classification of industries. Production is of three types: 1. Primary production 2. Secondary production 3. Tertiary production Primary Production This refers to the extraction of resources from nature to provide food and raw materials. This type of production involves the generation of goods in their natural form without any change or transformation by man. This is usually carried out by primary industries which are known as extractive industries or extractive occupation. On the whole, primary production involves mostly mining, agriculture (crop farming, forestry and fishery) and quarrying activities. Secondary Production This is a stage whereby raw materials or natural resources are converted or processed into finished goods which are acceptable to the consumers (consumer goods). It comprises all forms of manufacturing and construction work. Such finished goods and services include clothes, shoes, furniture, books, sports equipment, machines and construction of buildings, bridges and roads. Tertiary Production This is concerned with the provision of general and direct services like transportation, banking, insurance, teaching, legal services and medical services. It mainly involves the distribution of what has been manufactured or extracted. Production is said to be incomplete until the goods are in the hands of the final consumers. Direct and Indirect Production Production is said to be direct when goods are produced for immediate consumption. The goods which are thus produced are called consumer goods or final goods. These include clothes, chairs, books, pens, etc. Consumer goods may be durable in which case they can be used for several times or they may be non-durable (perishable) in which case they are used up at once. Production is said to be indirect if the goods produced are not for immediate consumption but for further production or for the production of other commodities. For example, cassava which is used to make garri, limestone which is used to make cement, cocoa which is used to make chocolates and palm oil for making soap. The goods which fall into this category are called capital, intermediate or producer goods. Factors of Production These are referred to as productive resources or agents of production which can be human or material. They are those inputs or resources which must be combined in order to produce goods and services. Factors of production are not desired for their own sake but for the production of consumer goods. Therefore, the demand for them is derived. There are four factors of production. These are land, labour, capital and entrepreneur. a. LAND Land is the surface of the earth and it includes the land which is underneath the earth’s crust, in the air, on the sea, under mines and quarries. Land also refers to all forms of natural resources of a country which are given to man freely by nature. They include the soil, farmland, mineral deposits, bodies of water, forests, etc. Characteristics of Land 1. It is a free gift of nature. Land is not produced by any human being. It was supplied to man freely by nature. 2. The supply of land is fixed and cannot be increased. It cannot be replaced because it is exhaustible. The natural resources contained therein are fixed in quantity and cannot be increased by man’s effort. Thus, land is a fixed factor of production. 3. Land is geographically immobile or immovable. It is not possible to physically transport land from one place to another. 4. There can be no production without the use of land in one form or the other. 5. Land varies in quality and value from one place to another. 6. Land is subject to the law of diminishing returns. Diminishing returns occurs when land is used for agricultural purposes. A piece of land that is continually cultivated becomes less and less productive overtime. 7. The demand for land is a derived demand because land is desired either for the sake of the resources present within it or for the various uses to which it can be put. 8. The reward for land is rent. Uses/Importance of Land 1. Land provides physical support for man’s economic and social activities. Factories, buildings and structures are built on land. 2. Agricultural activities take place on land. Crops are cultivated and livestock are reared on land. In other words, without land, farming would be impossible. 3. Mineral resources such as metal ores, precious minerals, crude oil and other are derived from land. 4. Water bodies such as lakes and oceans not only serve as means of transportation but also provide areas for fishing. These water bodies are situated on land. 5. Land is the natural home of various biological species like the animals and plants. These depend on land for their survival. 6. Land is the medium of decomposition of all wastes. Land helps the waste to decompose which makes it less harmful to the health of human beings, plants and animals. Land and the Law of Diminishing Returns The law of diminishing returns is also referred to as the law of variable proportions. It examines and shows the relationship and direction of change in output when some factors of production are varied. The law states that if there is an increase in the input of one factor, while the inputs of the other factors or resources are kept constant, the total output will decreasingly become smaller This implies that as more and more of a variable factor such as labour is combined with a fixed factor such as land, the total output will increase up to a point and later it will decrease as a result of continuous addition of the variable factor while the fixed factor remains constant. The law is applicable to both agricultural and industrial sectors which use both fixed and variable factors of production. LABOUR This can be defined as skilled, semi-skilled and unskilled human effort, either mental or physical, which is put into the production process. It is human skill and knowledge utilized in the production process. In other words, labour refers to human physical and mental effort directed towards the production goods and services. Characteristics of Labour 1. It is human effort that is both mental and physical, directed at production. 2. It is perfectly mobile, that is, labour can move from one occupation or geographical location to another. 3. Labour is perishable. The knowledge, ability and skills of labour can diminish overtime as a consequence of age, protracted unemployment, handicap, etc. 4. The demand for labour is a derived demand because labour is demanded for what it can be used to produce. 5. The quality of labour depends on training and the level of education acquired. 6. The supply of labour is by human beings. Hence, it is not artificial.  7. Labour is employed for current or immediate use. It cannot be stored up to be used for a later period of time. 8. The reward for labour is wages and salaries. 9. Labour has feelings, instincts and initiative. It cannot be employed without careful thought. 10. Labour is an active factor of production without which other factors of production would remain dormant. 11. Labour requires motivation and usually performs better when given incentives. Importance of Labour 1. Provision of Personnel: Labour provides necessary manpower or personnel required for the production of goods and services. 2. It influences other factors of production: Labour is an active factor of production and without it, land and capital would be idle. 3. Operation of Machines: Labour is required in industries to operate machines and to carry out various production processes. 4. Production of Goods and Services: Labour, especially the active working population, provides goods and services needed by the populace. EFFICIENCY OF LABOUR Efficiency of labour can be defined as the ability of labour to increase output without increasing the quantity of labour. If labour is efficient, the quality of goods and services produced would be higher. The relative efficiencies of labour of different workers at different places or organizations depend upon a number of factors which are: 1. Personal qualities of workers 2. Working conditions 3. Social, political and economic condition 4. Employer-employee relations CAPITAL AS A FACTOR OF PRODUCTION: This refers to all man-made productive assets, resources or wealth used in the production of goods and services. In other words, capital is the wealth of individuals and communities other than land which is used in production. They are also called investment or producer goods. They are goods which are demanded not because they offer direct satisfaction but because they enhance the production of consumer goods, services and other capital goods. Examples of capital includes physical cash, cutlass, hoe, machines, buildings, motor vehicles, raw materials, semi-finished goods, tools and other equipment used in the production of goods and services. The reward for capital is interest. CHARACTERISTICS OF CAPITAL 1. Capital in all forms is made by man before it can be used for production of goods and services. This implies that capital is an artificial factor of production. 2. Capital is generally durable assets which can be used for production. This means that capital is usually not used up in the process of production but it can last for some period of time. For example, buildings and equipment which continue to be used for production for several years. 3. Capital exists in different forms. It may be physical like building, motor vehicle, plants and other machinery or liquid like cash or money. 4. Capital, especially in physical form, is mostly subject to depreciation. For example, buildings, vehicles, machines, etc. experience wear and tear with continuous usage. Generally, the efficiency of capital reduces with longer time of usage. 5. The reward for capital is interest. TYPES OF CAPITAL 1. Fixed Capital: These are assets which are not exhausted or used up during production. They are the durable or long-lasting and tangible assets of a business. They do not change their form during the course of production. Examples of fixed assets include buildings, tools, motor vehicles, plants, machinery, etc. 2. Circulatory or Working Capital: These are assets which are completely used up or consumed in the course of production. They are needed for the actual daily work of productive activities of the business. This is because without them, production cannot take place. They change their form in the course of production. Hence, while some become finished goods, some are completely used up. They include raw materials, water, fuel, etc. 3. Current or Liquid Capital: These are the type of capital needed for the day-to-day running or the daily productive activities of a business. They are also changed from one form to another. For example, finished goods, cash. 4. Social Capital: This comprises of a country’s stock of social amenities or infrastructural facilities. It refers to those forms of assets or capital provided by the government in order to aid production. It includes social amenities such as electricity, schools, railways, sea-ports, etc. The availability of these amenities aids the production process in any given location. IMPORTANCE OF CAPITAL 1. The availability of sufficient capital facilitates the smooth production of goods and services. This is because with available capital, the process of production can be carried out much easier and faster. Capital helps to reduce drudgery or boredom at work and enables the production process to proceed without delay. 2. Capital boosts business efficiency. Capital in form of machinery tends to produce a higher output with a fixed quantity of land than labour. This is because capital does not suffer from fatigue and other human factors the way labour does. Capital is generally more efficient than labour and that is why machines can be used to replace the manual labour. For example, in agriculture, farm machineries are able to cultivate more land than human labour per unit of time. 3. The availability of social capital assists in the location of industries. This is because many businesses would prefer to operate in areas where social amenities such as roads, water and electricity are adequately provided. 4. Capital helps to improve the standard of living. This is because the availability of adequate capital enables people to acquire more assets and property which would increase their living standard. 5. Sufficient capital in a business improves the quality of the goods and services which it produces. Goods produces in an organization with much capital tend to have better quality in terms of precision, hygiene and safety standards than those done by human labour which is more prone to errors. 6. The existence of sufficient capital assists or encourages firms to embark on mass or large scale production of goods and services. With capital, companies are able to produce standardized products in large quantities. 7. Sufficient capital helps to enhance the practice of division of labour in many companies. Capital helps to organize and separate the production process into different stages and each of these stages can be handled by a single person or group of persons. This enables companies to make use of division of labour in their businesses. ENTREPRENEUR AS A FACTOR OF PRODUCTION This is the chief coordinator, controller, planner and organizer of the production process. The entrepreneur is the manager and the risk-bearer of a business organization. He or she combines and supervises all other factors of production, that is, land, labour and capital; in such a way to obtain maximum output or production of goods and services at minimum possible cost and thus generate maximum profit. In addition, the entrepreneur takes the major business decisions concerning the company. He or she determines what to produce, the quantity to produce and the most efficient combination of the factors of production. The reward for the entrepreneur is profit. CHARACTERISTICS OF AN ENTREPRENEUR 1. The entrepreneur is the one who takes decisions during the production process. These include decisions on what to produce, the quantity to produce, what to supply and at what price. These decisions can either be taken alone or in consultation with others. 2. The entrepreneur is one who ensures the provision of adequate capital for the business. 3. The entrepreneur is the one who bears the risks associated with the business such as burglary, bad weather, fire, etc. 4. The entrepreneur should be able to organize the productive resources by effectively combining factors of production in order to produce goods and services. 5. The entrepreneur should be focused and goal-oriented because at all times, he or she would be striving to meet the objectives of the business which are maximize output and profits at the lowest possible cost. 6. The entrepreneur should maintain good communication and relationship among the various departments and staff of the organization. FUNCTIONS OF AN ENTREPRENEUR 1. The entrepreneur ensures effective organization in the business by employing qualified personnel, assigning as well as supervising and coordinating the operations in the business. 2. The entrepreneur conducts research which enables him or her to keep abreast of recent technological developments in the production of goods and services as well as market trends concerning the product of the business. 3. The entrepreneur facilitates efficient management in the production line by combining other productive resources or factors of production. The entrepreneur co-ordinates and controls all other factors in order to achieve the objectives of the business. 4. The entrepreneur provides capital for the start-up as well as the day-to-day running of the business. The funds for the business are either obtained from personal savings or through borrowing. 5. The entrepreneur takes decisions on how to produce, how much to supply and the price which the goods will be sold at. He or she also makes decisions on the personnel and capital requirements of the business. 6. The entrepreneur bears the risk of the business and to him is attributed the success or failure of the business.