Economic Resources BBI2O

Economic Resources Also known as factors of production Are the means through which goods and services are made available to consumers Three types of economic resources: Natural Resources Human Resources Capital Resources

1. Natural Resources Are materials that come from the earth, water, and air that are used in the production of goods and services For example: Soil, iron ore, gold, diamonds, trees, wildlife, agricultural goods, fish, water and oxygen. However, most natural resources are non-renewable thus, they are limited in their supply. Non-renewable resources- A resource of economic value that cannot be readily replaced by natural means on a level equal to its consumption. Other renewable resources take decades to replenish i.e. forests

2. Human Resources Often referred to as labour, are people who work to create the goods and services. For example: farmers, factory workers, construction workers, web designers, investment bankers, teachers, nurses, and pilots. The human component is so important that many businesses have established Human Resources Departments to manage their employees

3. Capital Resources The third factor of production, Include: buildings, equipment, tools, trucks/cars, and factories Usually these resources last a long time and often require a substantial investment by the business Money is another example of a capital resource Money is used to buy other capital resources such as the raw materials and services they use to produce their own good or service

Interdependence Society’s reliance on thousands of businesses to provide goods and services that meet our needs and wants is an example of interdependence. Businesses are also interdependent, relying on each other for their day to day operations. For example, a clothing manufacturer making jeans (zipper, buttons, etc.)

Economic Systems Is a method of dealing with the selection, production, distribution and consumption of goods and services in society. Gov’t and businesses work together to foster activity and growth in the marketplace Economic systems must answer three major questions: What goods and services should be produced within the system? For whom should these goods and services be produced? How should these goods and services be produced?

Demand, Supply & Price Law of Demand Demand is the quantity of a good or service that consumers are willing and able to buy at a particular price. Since each of us have different needs and wants as well as different levels of ability to make purchases, our demands differ. General Rule: Demand increases as prices decrease and vice versa

Conditions That Create Demand Awareness - Consumers must be aware of, or interested in the good or service (thus the need for advertising/ marketing) Supply - the supply of the product also determines demand. Price - Is the price reasonable/competitive? Accessibility - the good or service must be conveniently located for the consumer to purchase (this is why location is so important in the success of a business)

Law of Supply Supply - is the quantity of a good or service that businesses are willing and able to provide within a range of prices that people would be willing to pay. Businesspeople recognize consumer wants and needs and try provide the goods and services to satisfy them Generally speaking, as prices increase, producers will be able to use the increased revenue to put more goods and services on the market. Businesses can afford to pay overtime, expand factories, hire another shift of employees, and buy more productive equipment

Conditions that affect Supply Change in number of producers – new businesses enter the market Changes in price – if price decreases demand in creases and vice versa Changes in technology – new equipment reduces the cost of production therefore more businesses are willing to enter the market and supply increases. Changing expectations for the future – Producers must plan ahead to forecast sales, production, financing and marketing. Many producers try to predict consumer behaviour for 2 – 5 years in the future. As conditions change they increase or decrease production accordingly. Changing production costs – if producers can find cheaper suppliers they can produce more goods for the same cost of production. Thus, supply will increase.

Relating Price to Supply and Demand Supply and demand affect price If demand of a good or service is high while the supply of that particular good or service is low, prices will be high If demand for a good or service is low but supply is high, then prices will tend to be low Prices tend to fluctuate because supply and demand are constantly changing – i.e. demand for winter clothes (high in winter, very low in summer). Price is also influenced by cost of production, the higher the price the lower the demand and vice versa