Resource Utilization and Economics

RESOURCE UTILIZATION
AND
ECONOMICS
Timothy O. Atayde
BAMA203

RESOURCE UTILIZATION AND ECONOMICS
ECONOMICS
• Efficient allocation of the scarce means of
production toward satisfaction of human needs
and wants.
• Came from two Greek words: “oikos” (household)
and “nomus” (system or management).
• “Oikonomia” or “oikonomus” therefore means the
management of household.

SCARCITY
• Limitedness of resources.
• The limited availability of economic resources
relative to man’s or society’s unlimited demand
for goods and services.
• The basic and central economic problem
confronting every man and society.

FACTORS OF PRODUCTION
• LAND – The soil or the ground surface together with all the
natural resources; the compensation for use of landis called
rent.
• LABOR – Any form of human effort exerted in the production
of goods and services. The compensation for labor
rendered is called salary (annual basis) or wage (hourly
compensation).
• CAPITAL - Man-made goods used in production of other
goods and services.
• ENTREPRENEURSHIP – The person who manages all the
factors of production.

CIRCULAR FLOW MODEL
BUSINESS
•WAGES, SALARIES,
RENT, INTEREST, PROFIT
RESOURCE MARKET
•LABOR, LAND, CAPITAL,
ENTREPRENEURIAL ACTIVITY
•BUY RESOURCE
•SELL PRODUCTS
•SELL RESOURCE
•GOODS AND SERVICES •BUY PRODUCTS
PRODUCT MARKET
•CONSUMPTION AND EXPENDITURE
HOUSEHOLD

CIRCULAR FLOW MODEL
• RESOURCE MARKET - the place where resources or
the services of resource suppliers are bought and
sold.
• PRODUCT MARKET – the place where goods and
services produced by businesses are bought by
and sold to the households.
• BUSINESS – buys resources and sell the products.
• HOUSEHOLD – buys products and sell resources.

OPPORTUNITY COST
• Refers to the foregone value of the next best
alternative.
• Expressed in relative price. This means that the
price of one item should be relative to the price
of another.

BASIC DECISION PROBLEMS
• CONSUMPTION – The society decides the goods and
services they want to consume and utilize.
• PRODUCTION – The producers determine the consumer’s
demands and decides how to allocate resources to
meet them.
• DISTRIBUTION – Proper allocation of all the resources for
the benefit of the whole society.
• GROWTH OVER TIME – All problems of choice have to be
seen in the context of future events.

FOUR BASIC ECONOMIC QUESTIONS
• What to produce?
• How to produce?
• How much to produce?
• For whom to produce?

3E’S IN ECONOMICS
• EFFICIENCY- refers to productivity and proper
allocation of economic resources.
• EFFECTIVENESS – Attainment of goals and
objectives.
• EQUITY- Justice and fairness.

POSITIVE AND NORMATIVE ECONOMICS
• POSITIVE ECONOMICS - An economic analysis
that considers economic conditions “as they are”
or “as it is”.
• NORMATIVE ECONOMICS - An economic analysis
which ju8dges economic conditions “as it should
be”.

CETERIS PARIBUS ASSUMPTION
• “All things are held constant or else equal.”
• Used as device to analyze the relationship
between two variables while the other factors are
held unchanged.

BRANCHES OF ECONOMICS
•MICROECONOMICS – Individual decision, focuses
on two main players – the buyer and the seller.
•MACROECONOMICS – It seeks to understand the
behavior of the economy as a whole.

TYPES OF ECONOMIC SYSTEM
• TRADITIONAL ECONOMY – basically a subsistence
economy
• COMMAND ECONOMY – production is dictated by
the government.
• MARKET ECONOMY – resources are privately owned.
• SOCIALISM – owned by the state.
• MIXED ECONOMY – mixture of market and
command.

IMPORTANT ECONOMIC TERMS
• WEALTH- anything that has functional value.
• CONSUMPTION- usage of the available goods
and services by the buyer or consumer.
• PRODUCTION- creation of firms by an output.
• EXCHANGE- process of trading or buying and
selling goods or services for money.
• DISTRIBUTION- process of allocating or
apportioning scarce resources to be utilized.

NOTABLE ECONOMISTS AND THEIR CONTRIBUTIONS
• Adam Smith – known as the “Father of Economics”, wrote
the “Wealth of the Nations” known as the bible in
economics.
• Karl Marx – wrote “Das Kapital”
• Alfred Marshall – wrote “Principle in Economics” and
developed the analysis of equilibrium and the concept of
marginalism.
• John Maynard Keynes – wrote “The General Theory of
Employment, Interest and Money”
• John Hicks – recognized for his analysis of the IS-LM model

Resource Utilization and Economics

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