ECONOMIC GOODS, FREE

GOODS AND ECONOMIC BADS

A good is said to be an economic good if
the quantity of the good demanded exceeds
the quantity supplied at a zero price
In other words, a good is an economic good
if people want more of it than would be
available if the good were available for
free.
A good is said to be a free good if the
quantity of the good supplied exceeds the
quantity demanded at a zero price
In other words, a good is a free good if
there is more than enough available for
everyone even when the good is free
An item is said to be an economic bad if
people are willing to pay to avoid the item.
Examples of economic bads include things
like garbage, pollution and illness.
FACTORS OF PRODUCTION
Goods that are used to produce other
goods or services are called economic
resources (and are also known as inputs or
factors of production)
These resources are often categorized into
the following groups:
1. Land
The category of land includes all natural
resources. These natural resources include
the land itself as well as any minerals, oil
deposits, timber, or water that exists on or
below the ground
This category is sometimes described as
including only the free gifts of nature.
2. Labour
The labour input consist of the physical
and intellectual services provided by
human beings.
3. Capital
The resource called capital consist of the
machinery and equipment used to produce
output
4. Entrepreneur
Entrepreneurial ability refers to the ability
to organize production and bear risks
The resource payment associated with each
resource is listed in the table below:
   
Economic Resource Resource Payment
   
   
Land Rent
 
   
Labour Wages
 
   
Capital Interest
 
   
Entrepreneurial ability Profit
 
 ECONOMIC GROWTH
 
Economic growth is the annual percentage
increase in a country’s Gross Domestic
Product (GDP)
This means the annual percentage increase
in the value of goods and services produced
in the economy
An increase in economic growth caused by
more efficient use of inputs such as labour
productivity, physical capital, energy or
materials is referred to as intensive growth
GDP growth caused only by increases in the
amount of inputs available for use ( increased
population, new territory) is called extensive
growth.
Gross Domestic Product (GDP) measures the
goods and services produced in an economy
every year.
FACTORS THAT INFLUENCE
ECONOMIC GROWTH WITHIN A
COUNTRY
1.Land ( natural resources) Available
2.Investment in Human Capital
3.Investment in Physical Capital
4.Entrepreneurship
THE BENEFITS OF ECONOMIC
GROWTH
(a) Elimination of primary poverty: for a
developing nation the increase in
employment and incomes leads to better
nutrition, housing and via tax revenues,
ability to afford education and public
health.
 
(b) Improved quality of life: data shows
that happiness of the population increases
as income per person does, at least up to a
level of USS 15,000 per person.
 
(c) Rising employment: economic growth
encourages investment and creates jobs
and incomes.
(d) Improved social infrastructure:
increased employment, incomes and taxes
enable government to spend money on
improving housing, education and the
public environment as well as reducing the
share of the government budget being
spent on welfare benefits.
THE DRAWBACKS OF ECONOMIC
GROWTH
(a) Promotion of inflation: high growth of
incomes and spending can create shortages
of labour and other factors of production
and lead to rising prices.
(b) Environmental impacts: growth will
increase the need for resources, building
land and transportation. Emissions of
fumes and waste from factories will
increase.
(c) Inequalities of income: people without
the skills needed by the new industries will
be left behind on low incomes and
competing for the housing and consumer
products with richer people.
(d) Regional disparities: the growing
industries will draw population and
resources to their location. This will cause
de-population and hardship elsewhere,
particularly in rural areas.
(e) Resource depletion: where the growth
uses natural raw materials and
agricultural land, this can lead to the
exhaustion of these and a sudden increase
in cost and loss of growth.
ECONOMIC SYSTEMS
An economic system refers to the means by
which decisions involving economic
variables are made in a society
Economists identify three main ideal types
of economic systems
1. Command economy
2. Free market economy
3. Mixed economy
1.The Command or Centrally
Planned Economy