INTRODUCTION TO ECONOMICS - LESSON#2

in #economics7 years ago


Economics; Another Perspective
Š Economics is the study of the choices made by people who are faced with scarcity.
Š Scarcity is a situation in which resources are limited but can be used in different ways;
so one good or service must be sacrificed for another.
Society’s Choices
Š The decisions of producers, consumers and government determine how an economic
system answers three fundamental questions:

  1. What products do we produce?
  2. How do we produce these products?
  3. Who consumes the products?
    Factors of Production
    Factors of production are the resources that are used to produce goods and services:
  4. Natural resources:
    The things created by acts of nature such as land, water, mineral, oil and gas
    deposits, renewable and nonrenewable resources.
  5. Labor:
    The human effort, physical and mental, used byworkers in the production of goods
    and services.
  6. Physical capital.
    All the machines, buildings, equipment, roads and other objects made by human
    beings to produce goods and services.
  7. Human capital:
    The knowledge and skills acquired by a worker through education and experience.
  8. Entrepreneurship:
    The effort to coordinate the production and sale of goods and services.
    Entrepreneurs take risk and commit time and money to a business without any
    guarantee of profit.
    The Production Possibilities Frontier
    (PPF)
    The PPF curve shows the possible
    combinations of goods and services
    available to an economy, given that all
    productive resources are fully and efficiently
    employed.
    When the economy is at point i, resources
    are not fully employed and/or they are not
    used efficiently. Point gis desirable because
    it yields more of both goods, but not
    attainable given the amount of resources
    available. Point dis one of the possible
    combinations of goods produced when
    resources are fully and efficiently employed.
    Scarcity and the PPF
    To increase the amount of farm goods by
    10 tons, we must sacrifice 100 tons of
    factory goods.
    The PPF curve is bowed out because
    resources are not perfectly adaptable to the
    production of the two goods. As we
    increase the production of one good, we
    sacrifice progressively more of the other.
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Upvoted, though economics was my greatest enemy back then in school

ECONOMICS IS ALL OUT WEALTH.

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