Introducing Economics
What this subject is all about.
The first thing you need to know about Economics is what we learn it for. I've had many 1-1 students in the past whom when I ask, "What is Economics?", reply, "The economy" or "The stock market" or "Inflation". "It's all about money isn't it?"
The first piece of advice I will give you is to stop thinking this way, at least at the beginning. When you think about Economics, try and think about the word "economise". When you economise, you are trying to do get a benefit from something while using as little of a resource as possible.
For example, if you are trying to economise with your washing powder, you will use just enough to get the same cleaning results as before, while using the least amount of washing powder possible.
Economics is about the same thing. We have these things called "resources" or "factor inputs" or "factors of production". They all mean the same thing really. These are what we use to make things (our outputs). The resources we have on planet Earth can be boiled down to the following 4 categories:
1) Land - land is not only the physical land/space that we have - it also refers to the natural resources that we have on this planet. Most of these resources are limited, so they will run out one day (non-renewable). For example, gold is a natural resource and so is crude oil. Some of these resources are renewable, for example fish in the sea. As long as we do not overfish, then the stock of fish in the ocean will continue to reproduce and replenish itself.
2) Labour - labour is the human part of producing a good or service. Without human beings, we could not use our land to make anything because who is going to do the work?
3) Capital - capital is the man-made element of producing a good or service. It is the tools/machinery that we use to make things. In the modern day world, it can also refer to computers and software. They are tools that our labour use to produce something. For example, a machine at a crisp factory is used to mass produce crisps. A painter and decorator needs a van to store all his equipment and get to people's houses. These are examples of capital.
4) Enterprise - the final part of producing a good or service comes from the entrepreneur - the business person who is prepared to take a risk with their money and make all the magic happen. Originally, enterprise was not considered to be a factor of production but today it is considered to be a factor. Why? Without business people, nothing would be produced. We would not have Microsoft or Windows if Bill Gates were not prepared to take a risk to make and sell the product. Bill Gates is the entrepreneur - without him, no Windows.
The 4 examples above are called our "Factors of Production".
So when somebody asks you, "What do you learn in Economics", you can now give them this answer:
"The purpose of economic activity is to create outputs to satisfy people's needs and wants and improve their welfare. The problem we have is that human beings want everything but the planet has a limited amount of resources available. We learn Economics because we are trying to find the most efficient way to satisfy our infinite needs and wants using the scarce resources on our planet".
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