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Chapter 1

ECONOMICS NOTES

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23 views6 pages

Chapter 1

ECONOMICS NOTES

Uploaded by

menasserysumesh123
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 1

The nature of the economic problem

The Economic problem : Unlimited wants and limited resources

Resources : The factors used to produce goods and services are


resources.

Economic goods and free goods

The goods which require resources to produce it and therefore has


an opportunity cost is economic goods. Eg: Table, chair, car etc.

The goods which do not require any resources to make it and do not
have an opportunity cost is free goods. Eg: air, sunlight, rain water
etc.

Chapter 1The nature of the economic problem

The Economic problem : Unlimited wants and limited


resources

Resources : The factors used to produce goods and services are


resources.Economic goods and free goods

The goods which require resources to produce it and therefore has


an opportunity cost is economic goods. Eg: Table, chair, car etc.

The goods which do not require any resources to make it and do not
have an opportunity cost is free goods. Eg: air, sunlight, rain water
etc.
Chapter 2

Factors of production
The economic resources land, labour, capital and enterprise that can
be used to produce goods and services is known as factors of
productions.

Land
Land is gift of nature it covers any natural resources which is used in
production. Land includes, what is beneath the land, over the land
and above the land. Eg: Coal, rivers and forests and air etc.

Labour
Labour covers all mental and physical effort of human involved in
producing goods and services. Eg: a road sweeper, a steel worker and
a bank manager.

Capital
Capital is the manufactured good used to produce other goods and
services. For example, office, factories, machinery, railway and tools.
Capital is also referred to as capital goods.

Consumer goods are the goods which can be used directly to fulfill
our wants and needs. Example, food, clothing and entertainment.

Enterprise
Enterprise is the willingness and ability to bear uncertain risks and to
make decisions in a business. Entrepreneurs are the people who
organize the other factor of production and decide what to produce
and how to produce it.
Mobility of factors of productions
Occupational mobility : The capability of a resource to change its
use.

Geographical mobility : The capability to move from one place to


another.

Mobility of land
Most land is occupationally mobile. It can be used for number of
purposes.

Generally land is geographically immobile. It is not possible to move


from one place to another.

The mobility of labour


The mobility of labour varies. Some workers may find difficult to
move from one area to another and one job to another.

The causes of geographical immobility are :

 Price and availability of housing in different areas


 Family ties
 Differences in educational systems
 Lack of information
 Restriction on the movement of the workers

Reasons for the occupational immobility are :

 Lack of informations
 Lack of skills and qualifications
The mobility of capital
The mobility of capital varies according to the type of capital goods.
A photocopier used in a bank can be sold to a bank in another area.
A harbor is fixed in position and are geographically and
occupationally immobile, because cant change the use of it.

Mobility of enterprise
The mobility of enterprise depends the mobility of entrepreneurs. It
is most mobile factors of production. The skill and the ability to take
risk of the entrepreneur make the enterprise more geographically
and occupationally mobile.

Quantity and quality of factors of production


The quantity of land: The amount of physical land does not
change with time. But there is certain degree of soil erosion and
reclamation, which make changes in the quantity of land.

Quality of land: There are some reasons, the quality of natural


resources may increase. Fertilizers can improve the quality of land
and the purity of rivers can be improved by stopping polluting them.

The quantity of labour : The quantity of labour influenced by two


factors –

1. Number of workers

2. Number of working hours

The number of workers is determined by :

 The size of the population


 Age structure
 The retirement age
 The school leaving age
 Attitude to working women

Number of working hours can be deteremined by :

 Length of working time – part-time or ful-time


 The duration of overtime
 Length of holidays taken by the workers
 The amount of time lost by sickness and illness.

Labour force : The people who are working and those who are
actively seeking work

Productivity of labour : the output per worker.

The quality of labour : The quality of labour influenced the


education, training, experience and the healthcare.

The quantity of capital


The quantity of capital influenced by investment.

The total value of capital goods is referred to as gross investment.

The quality of capital : The quality of capital influenced by the


advances in technology.

The quantity of enterprise


The quantity of enterprise will be influenced by a good education
system, lower taxes and reduction in government regulations. Which
encourage more people to set up their own business.

The quality of enterprise


The quality of enterprise can be improved by better education, better
training, better healthcare and more experience.

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