Introduction to Economics PDF

Economics What is Economics? Economics is a science which allows us to make a choice between unlimited needs and wants and limited resources efficiently and effectively. Why are we studying economics? To identify how to satisfy unlimited wants by using the limited resources. Economics can be iden...

Economics What is Economics? Economics is a science which allows us to make a choice between unlimited needs and wants and limited resources efficiently and effectively. Why are we studying economics? To identify how to satisfy unlimited wants by using the limited resources. Economics can be identified as the process through which limited resources are allocated among the unlimited needs and wants. Needs and Wants. Needs Needs are the things that are essential for human survival. Ex – Water, Food, Clothes, Shelter Wants Wants are the different ways of satisfying needs Water – tap water, Mineral water, Cool drinks, Juices, Hot drinks Food – Rice, bread, Burgers, noodles, Pizza Clothes – trousers, Shirts, saris, jeans, skirts Resources Resources are the things that are used by humans to satisfy their needs and wants. 01. Non-economic resources 02. Economic resources 01 Non-economic resources These are the resources that consumers don’t have to pay in order to consume. These are the resources where consumers cannot be excluded from consumption if they don’t pay. Ex – Sunshine, Water from a river 02. Economic resources. Economic resources are the resources that consumers have to pay money in order to consume. In economic resources if the consumer does not pay they will be excluded from consumption. Ex – Lap top, Mobile phone, food, and pen  For Sri Lankans sunshine is a non-economic resource, but If a tourists buys an airplane ticket and come to Sri Lanka to enjoy sunshine, for them sunshine becomes an economic resource.  If someone drinks water from a river it is non-economic  But when they buy a water bottle from a shop it becomes an economic. There are four basic types of economic resources. They are also known as Factors of production. 1. Land 2. Labor 3. Capital 4. Entrepreneurship/ Enterprise  Resources Economic Non economic resources resources Entreprenuership Land Labor Capital 01 Land Land can be defined as all natural resources that are being used in a production process. Ex – Water when used to generate electricity Oil, Gems, Diamonds or bare land when it is used in a production process. The payment for land is rent 02. Labor Any physical or mental effort generated by humans in order to produce a good or a service can be identified as labor. Ex – A doctor, Teacher, laborer, engineer, carpenter The payment for labor is salaries or wages 03. Capital All man made resources used in order to produce something can be identified as capital. Ex- computers in an office, Buildings, machinery Man-made resources can be identified as consumption goods when they are used for personal consumption. If the same product are being used to produce something else it becomes capital. The payment for capital is interest Ex – Computer at home is a consumption good Computer in an office is capital. 04. Entrepreneurship. The person or the organization who brings all other factors of production together in order to produce something is identified as the entrepreneurship. Ex – owner in a private hospital Owner of a private school. The payment for enterprise is Profit or loss