Firstly,let's start with scarcity.Everyday,we can see the news on newspapers,internet or telivision about the status of natural resources nowadays.Natural resources are being used up at an unbelivable pace.Tons of oil,ore...are mined daily,as well as millions of tree are being cut down to produce numerous kinds of goods and services for people.Althought we know that someday we have to face the scene that none of those resources would exist on the Earth,but humans needs and wants are still constantly unlimitted.
Move on to choices,due to the scarcity and the unlimitted humans wants,it means that we can not have whatever we want.That's the reason why choices appear in economics..For example i just have a limitted amount of income,whenever i purchase goods and services,i have to consider and think about it for a while and make a choice for myself.
The opportunity cost is related to the scarcity.As i said above,we can not have whatever we want and we have to make a choice.However,before we make a decision,we always implicitly compare the costs and the benifits of our choices.What will we receive from that choice?Hence,we have the definition of opp.cost.According to the textbook,opp.cost is the next best alternative foregone when an economic decision is made.To simplify,opp.cost means whatever must be given to obtain something.For instance, if I choose to buy one DVD as opposed to two video tapes, I must give up owning a second movie of inferior technology in exchange for the higher quality of the one DVD.Furthermore,the opp.cost is only applicable for "economic good",it means goods are made of scare resources.Those "free good" such as oxygen,water do not have an opp.cost.
Finally,we go to factors of production.In every economy,whether it's a planned economy or free market,they must have these four types of factors of productions:Land,Labour,Capital and Entrepreneur.These factors of productions are resources that are used to produce goods and services to satisfy human wants.I will briefly define those four factors.In economics,land includes not only the surface area on which the company builds building,factories,but also the natural resources in the land.Labour refers to any human effort used in the production of goods and services for which payment is made.And Capital is the part of wealth that has been made by man for the production of further wealth.Lastly,Entrepreneur is the one who take risks to organise the 3 other factors for the production of a good and service so as to be rewarded by profits.Applying in my father's business,which is electric cable,the land is ares that he sets up the offices and the factory.Unfortunately,there isnt any natural resources there can be used.The labour are those workers,officers of the company.The Capital is all the machinery,raw materials such as copper,aluminium...and the entrepreneur is my father.
Pham Duy Vu - 5Y
Thanks for sharing with us about your father's occupation! Raw materials (gifts of nature) is land though. Maybe in your next posting you can also share your thoughts on the choices that your father have to make as he continues running his business! Could be a great topic for production and costs!
ReplyDeleteVery interesting explanation on economics. Interesting that u brought in live examples ( your fathers occupations). i feel that the fact you listed out what you are going to go through before explaining it is very helpful in letting people understand your post.( E.g ''i will cover some basic concept of economics including the defination of scarcity,choices,opportunity cost,factors of production.'')
ReplyDelete( E.g four types of factors of productions:Land,Labour,Capital and Entrepreneur)(
'interesting that you brought in life examples' lol
ReplyDelete