THE BASIC QUESTIONS OF ECONOMICS

Economists refer to the things that individuals and institutions want as goods or services. Goods are tangible items of value, things that we can touch or see. Services are intangible things that have value. We can’t see or touch them. Haircuts, medical care and education are examples of services. As we use goods and services to satisfy our wants we consume them. Those who buy goods and services for personal use are called consumers. The fact of buying goods and services are called consumption.

The ingredients that go into the production of goods and services are the factors of production. We can define economics as the study of how people and societies use limited resources to satisfy their unlimited wants. It is the study of scarcity and choice. The factors of production are: human resources, natural resources, capital resources and entrepreneurship. Economists use the term human resources, labor and the workforce to describe the people whose efforts and skills go into the production of goods and services. Human resources influence the production of goods and services in two ways. First, the size of the workforce affects the amount of goods and services produced. But more important is labor productivity, which is the amount each worker produces in a specified time. Productivity, in turn, is affected by the skill of the labor force, the quality and quantity of machinery and tools available per worker and technology. Natural resources are materials obtained from the land, sea and air. They include soil, minerals, fish, water and timber.

Some regions of the world have low standards of living because they have few natural resources. In economic terms, standards of living refer to the quantity and quality of goods and services that are available to an individual or a society. The only way to improve the living standards of these regions is to strengthen the regions’ other productive factors labor, capital and management. Switzerland, Denmark and Japan, each has limited natural resources, but each also has a high living standard because its other resources are highly developed.

The machines, tools and buildings that we use to produce goods and services are called capital, or capital goods or capital resources. A factory that manufactures shirts is a form of capital because it produces those goods. We should not confuse the term “capital” with the money which in other contexts is also called “capital”.

The process of bringing together the three factors of production is entrepreneurship. The people who do this with the goal of creating and operating business enterprises are entrepreneurs. An entrepreneur introduces new products and techniques and improves management techniques in existing business.

TERMS TO LEARN

1. ECONOMICS
2. ECONOMIST
3. CONSUME
4. CONSUMER
5. CONSUMPTION
6. GOODS AND SERVICES
7. FACTORS OF PRODUCTION
8. HUMAN RESOURCES
9. CAPITAL RESOURCES
10. NATURAL RESOURCES
11. LABOUR
12. WORKFORCE / LABOURFORCE
13. LIVING STANDARD
14. ENTREPRISE
15. ENTERPRENEUR
16. ENTERPRENEURSHIP
17. PRODUCE
18. PRODUCER
19. PRODUCTION
20. PRODUCTIVITY

Date: 2016-04-22; view: 701