DEANE BEL E.

TRIA I 12 ABM-A
APPLIED ECONOMICS : LESSON 2
FACTORS OF PROD., ECONOMIC PROBLEMS

4 FACTORS OF PRODUCTION
Because ALL resources, goods, and
services are limited – WE MUST MAKE 1. Land / Natural Resources
CHOICES! 2. Labor
3. Capital
4. Entrepreneurship
Economic decisions begin?
: Fulfilling people’s needs and wants Natural Resources
: Things found on Earth, occur naturally
Why Choice? : without man’s intervention
: We make choices about how we : derived from the forces of nature,
spend our money, time, and energy so such as air, water, forests, vegetation,
we can fulfill our NEEDS and WANTS. and mineral
> Animals
What are the needs? > Trees
: are basic things we need it in order to > Coal
survive and remain alive > Oil
> water
> food Payment for Land : RENT
> clothing
> place to live Labor
: people perform work to produce
What are wants? something
: thing that we would like have : human input that used in
: not required to survive transforming resources into products
> cellphone
> vacation Payment for Labor : WAGES , SALARIES
> video games
Capital
: money and things needed to produce
Needs 1. Services Wants a good or service
2. Goods : man-made factor of production to
create product
> machinery
Services > equipments
: work done for other people > buildings
> doctor > tools
> painter
> lawyer Entrepreneurship
: someone that start the business / to
Goods improve it
: things produced or manufactured : integrates land, labor, and capital to
: man-made create new products
: made with & from resources : makes the decisions regarding
> car production and utilizing the other
> video game factors of production
> donut
Capital Natural
Resources Resources Goods Needs
: used to make goods or service Produces & &
: also known as Factors of Production Entrepreneu Labor Services Wants
rship
DEANE BEL E. TRIA I 12 ABM-A
APPLIED ECONOMICS : LESSON 2
FACTORS OF PROD., ECONOMIC PROBLEMS
Scarcity
: high demand, low resources
: when things are in short supply
People have UNLIMITED wants and needs, but
there are a LIMITED amount of resources to
meet their demands.
Effect : People have to make lots of
choices.
Each choice you make has benefits & costs
(missed opportunity.
Opportunity Cost
: what you gave up for making the
choice
Example:
Benefit Opportunity Cost
Earned College Degree Earning money from job
Time w Friends
Getting job experience
and skills
Trade-Offs
: you can’t have it all so you have to
choose how to spend your money,
time, and energy.
: These decisions involve picking one
thing over all the other possibilities.
Tradeoff is usually involved when a choice is made.
Thus, one has to give up something. The difference
between tradeoffs and opportunity cost is that
every time you make a decision, there is probably
a list of tradeoffs you make. The highest value
tradeoff is your opportunity cost.
Scarcity signals the need to make choices.
Trade – off is usually involved when a choice is
made. Thus, one has to give up something.
Opportunity Cost is the best alternative that
people forego, or give up, when making a choice or
decision.
WHAT GETS TO PRODUCE AND IN WHAT
QUANTITY?
:The main problem of the economy is
to decide what products and services
to produce and in what quantity.
: This involves allocation of scarce
resources which will serve as inputs to
make products to be used by buyers.
: Given that resources are limited,
society has to decide what resources
to produce.
HOW IS IT PRODUCED?
: involves finding the efficient and
effective technique for production.
: limited to the availability of the
resources such as equipment and
machinery of the country
Labor Intensive Technique
: More labor and less capital is used
Capital Intensive Technique
: More capital (machinery and
equipment) and less labor is used.
WHO GETS WHAT IS PRODUCED?
Luxury goods
: products that are not necessary and
are more costly
Consumer goods
: products that are purchased for
consumption by an average
consumers
Income dictates the share of a person or a family
on the total produce of an economy.
Economic System is characterized by the type of
institution responsible for the management and
allocation of resources used in the production of
goods and services.
DEANE BEL E. TRIA I 12 ABM-A
APPLIED ECONOMICS : LESSON 2
FACTORS OF PROD., ECONOMIC PROBLEMS
3 ECONOMIC SYSTEM
A. Market Economic System
: where all economic resources are
owned by private entities
> produce goods that yield high profits
> produce at max efficiency with min
costs
> distribute the good to those who can
afford to buy them
B. Command Economic System
: all resources are owned by the
government
> produce public schools, roads, public
hospitals
> all possible laborers, using available
machinery and equipments
> produce for the public
C. MIXED ECONOMIC SYSTEM
: both answered by government and
private entities in consideration of their
mutual benefits.
ECONOMIC PROBLEMS OF COUNTRY
IN THE 21ST CENTURY
Unemployment
: occurs when a person is unable to
find work
Shortage
: occurs when there is less supply than
consumer demand
Surplus
: occurs when there is excess supply
than consumer demand
Corruption
: refers to dishonest or fraudulent
behavior by people with power such as
managers
Poverty
: refers to the state or condition in
which people do not have the
minimum standard of life deemed
accepted by the society
Price volatility
: refers to the unpredictable changes in
prices (i.e. commodity price)
Tax issues
: refers to compulsory contribution to
the country’s revenue Issues on
education includes tuition and other
fees increase, bullying and even graft
and corruption
PRODUCTIVITY AND SPECIALIZATION
Main GOAL of Business
To make money : PROFIT
: money earned after all expenses
(bills) are paid
PRODUCTIVITY
: the amount of goods or services
workers can produce in a period of
time
> More goods / services are produced
quicker
> Less labor is required
> Goods / Services become less
expensive to make
Likely to make PROFIT
To increase PRODUCTIVITY
> Educated and trained workers
> Capital Resources
> Technology
SPECIALIZATION
: business focuses on producing a
specific type of good or service
Benefits:
> Builds a reputation and a
recognizable brand.
> Focuses its attention on what it does
best.
> Able to break down the production
process into steps and assign workers
a specific task or job.
Division of Labor – different people
perform different jobs to achieve
greater efficiency (assembly line)
DEANE BEL E. TRIA I 12 ABM-A
APPLIED ECONOMICS : LESSON 2
FACTORS OF PROD., ECONOMIC PROBLEMS