ECONOMICS:

How societies use scarce resources to produce

valuable commodities and distribute them
among people (to satisfy their unlimited wants).
• What goods are produced?
• What resources are used to produce the
goods?
• Who gets to consume the goods?
Microeconomics:
• Behavior of individual consumers and firms.

Macroeconomics:
• Behavior of the economy as a whole.
 There are four basic factors of production..

• Land: Includes the ground and natural resources such as crude oil,
water and minerals.
• Labor: Includes skilled and unskilled labor. Both the quantity and the
quality of human resources are included in the labor factor (e.g.,
skilled, unskilled …etc).
• Capital: Final goods produced to be used as inputs in further
production. It includes machines, equipment, buildings. Example:
residents of a fishing village in southern Thailand braided huge
fishing nets to catch more fish. The fishing nets are regarded as
capital.
• Entrepreneurship: This factor of production is related to how well a
given quantity of resources can be used in production. Entrepreneur
is the person who sees the opportunity of new or better products
and brings together the resources needed for producing them. The
entrepreneur is an organizer and a risk taker.
 Payments to Resources (returns to factors of
production):

• Land is paid rent

• Labor is paid wages
• Capital is paid interest or the rental price of
capital.
• Entrepreneur is rewarded profit.
• Scarcity
• Choice
• Opportunity Cost
• Scarcity: The imbalance between our desires and
available resources.
• Then economic scarcity forces us to make economic
choices. The most cited example is the choice
between more defense spending (guns) or more
spending on civilian goods and services (butter).
• Opportunity cost: What we forego when we make a
choice. Every time scarce resources are used in one
way we must give up the opportunity to use them in
other ways.
To produce more weapons, you must sacrifice the
opportunity of producing more civilian goods. The
sacrificed or foregone civilian goods represent the
opportunity cost of producing more weapons.
 A market includes buyers and sellers and it
exists whenever any exchange takes place. The
buyers are on the demand side of the market,
and the sellers are on the supply side of the
market.
• Market Participants:
• There are four participants in a market:
consumers, business firms, government and
the international sector. There are two types
of markets: the factors of production markets
and the product markets.
 International
participants
Product
Goods and services markets
demanded
Goods and services
supplied

Business
Consumers Governments Firms

Factors of
production supplied
Factor Factors of
markets production demanded
International
participants
Other Determinants of Market Demand:

The simple demand schedule or curve has only one

determinant which is the current price. Other
determinants of the standard demand include:

• Tastes (desire)
• Income (purchasing power)
• Price of related goods
• Expectations of future income, price and taste
• Number of buyers in the market.