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Nature of Economics

Nature of Economics

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Published by Chinchay Guinto
1. nature of economics
2. Facts about economics
3. importance of economics
1. nature of economics
2. Facts about economics
3. importance of economics

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Categories:Types, School Work
Published by: Chinchay Guinto on Feb 08, 2009
Copyright:Attribution Non-commercial

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06/18/2015

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BASIC ECONOMICS, LAND REFORM AND TAXATION
Knowledge is the greatest creator of wealth.
Page| 1
INTRODUCTION: NATURE OF ECONOMICS
An economy begins with the desires of the people in the society for material goods and services
.
Like in the movie, the two main characters put on to their
Bucket List's exotic backdrops — the GreatPyramids, the Taj Mahal, an African safari —to see and to visit. This are all material desires.
Notice that we use the word "desires" or "wants", rather than "needs". We will not concern ourselveswith the question of what it is that people truly need. Also notice that the focus is on material goodsand services. We will be concerned with food, shelter, clothing, health care, recreation,entertainment, and so forth; we shall not be concerned with psychological desires such as love, power,or respect.
(Any product that satisfies people's desires is called a "good" or a "service". The actof obtaining these material goods and services is called “consumption”.)
Modern Economics makes two assumptions about people's desires for material goods and services.
First, they are insatiable
.
 
No matter how many goods and services people have, they stillwant more. Today, even the poorest Filipinos have more goods and services than could havepossibly been imagined by people living 200 years ago. Yet, we still desire more and more.
Morgan Freeman himself says he has movies he still wants to make. Ellen DeGeneres wantsto learn Spanish; Beyoncé, a lifelong dancer, crossed ballet off her list (too hard) but addedlearning Arabic.
Second, they are rational 
.
 
People's desires are not to be questioned. I desire the things Idesire for my own reasons. You desire the things you desire for your own reasons. I know whatis best for me and you know what is best for you.In order to satisfy their desires for consumer goods, the people in the society must engage inproduction.
FACTORS OF PRODUCTION
To produce, people begin with
natural resources
.
 
Nature provides land, minerals, trees,water, fish, animals, and so forth. Usually the people must do something to these naturalresources to satisfy their desires --- harvest the fruits and vegetables, dig the minerals, cut thetrees, catch the fish, and so forth.
 
BASIC ECONOMICS, LAND REFORM AND TAXATION
Knowledge is the greatest creator of wealth.
Page| 2
The productive contribution made by the people is called
labor 
.
 
However, with naturalresources and labor alone, the society will not be able to satisfy the desires of the people verywell. From earliest times, people have learned that they could satisfy their desires better bytaking some of the natural resources and converting them into a form that will not meetdesires today but which will allow greater production in the future.
Thus, wood and iron are used to make a hammer. The hammer is not desired by anyone for itsown sake, but it allows people to build more of those things they do desire. We call thisindirect use of natural resources
“capital goods”.
Do not confuse this meaning of the word"capital" with other meanings. In business use, for example, capital sometimes refers to themoney invested by the owner of a business.
Capital 
here refers to goods made by people forthe purpose of increasing production.
Examples are machines, tools, equipment, and factorybuildings.
Finally, there is a need for someone to recognize the desires that people have and then bringtogether the appropriate natural resources, labor, and capital goods to meet these desires.There is risk involved; if one does not recognize the desires correctly or if one organizes theproduction inefficiently, considerable loss could result. So, for example, Steve Wozniak andSteven Jobs recognized a desire of some people in the society --- a desire for a computer thatcould be operated at home. They didn't just develop such a computer. They started acompany --- Apple. With others, they obtained the natural resources, hired and trained theworkers, bought the necessary machinery, and organized the production process. The successof the Apple II allowed both of them to have wealth valued in the billions of dollars. A personwho undertakes this activity is called an
entrepreneur 
.
 
Successful entrepreneurs becomefamous. So Ray Kroc (MacDonalds), Bill Gates (Microsoft), Sam Walton (Wal-Mart), Henry Sy(SM) and many others are very well known. Unfortunately, most entrepreneurs are not sosuccessful.Natural resources, labor, capital, and entrepreneurship are called the factors of production.
You Also Need To Know
 
BASIC ECONOMICS, LAND REFORM AND TAXATION
Knowledge is the greatest creator of wealth.
Page| 3
The factors of production determine the maximum amounts of the various goods and services that canbe produced at the present time. But people's desires for these goods and services are insatiable.
As aresult, the desires always exceed the ability to meet them, a phenomenon known as
 
scarcity. Defining our Real Basic NEEDS vs WANTS
1. Food. All we need is nutritious food cooked at home. Food becomes want when we decided to eatregularly at fancy restaurants and food chains.2. Clothing. We need clean, neat and suited for our daily activity. We do not need expensive anddesigner’s clothes.3. Housing and Utilities. A room or a house big enough for the family, a simple basic furniture such asstove, TV set and telephone or cp. A big house, expensive furniture, a home entertainment system andsophisticated cp are wants.4. Transportation. Enough money to go to work and return home is what we need. Owning bicycle,motorcycle or car are mostly wants.5. Education. Quality education need not necessary to be expensive. Going to prestigious school ismostly wants.6. Leisure. When the activity is for free or almost for free it is a need, like watching free concerts,borrowing books, going to work, etc. While those expensive and luxurious trip, vacation and having bigparties are usually wants.
Living our life without our basic needs makes life more difficult and not worth living. Look aroundyou and you will see that a lot of people are living without these basic needs.This is one of the reasons why we study economics: To make sure that you will be able to affordthese needs throughout your life.Economic Terms

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