Introduction to Macroeconomics

GOODS
Is anything which
yields satisfaction
to someone. It is
anything that
satisfy a person’s
wants and desires.

Tangible GOODS
Goods may be tangible when
they are materials or
commodities. In a simple
sense, these are the
materials or commodities
that can be touched.

intangible GOODS
Intangible services like
those rendered by the
doctor the teacher,
painter, beautician and
even the prostitutes are
all used in the satisfaction
of human wants and needs.

Goods which are yield
directly, just like
softdrinks and foods.
consumer
GOODS

capital
GOODS
Goods used in the
production of other goods
and services.

LUXURY
GOODS
These are the goods which
man may do without, but
are used to contribute to
his comfort and well-being.

ECONOMIC
GOODS
Goods which are both
useful and scarce. It has a
value attached to it and a
price has to be paid for its
use.

Free
GOODS
Goods that are so
abundant that there is
enough of it to satisfy
everyone’s needs without
anybody paying for it.

This type
of
productio
n takes
place in
factory.
Manufacturing/ industry

This type
of
productio
n takes
place in
farm.
agriculture

ECONOMIC
RESOURCES
Economic resources are the goods
or services available to individuals
and businesses used to produce
valuable consumer products.

FOUR FACTORS
OF PRODUCTION
Land
Labor
Capital
Entrepre

Land is the
economic
resource
encompassing
natural
resources
found within a
nation’s
economy. This
resource

Although some natural resources, such as timber, food
and animals, are renewable, the physical land is usually a
fixed resource. Nations must carefully use their land
resource by creating a mix of natural and industrial
uses. Using land for industrial purposes allows nations to
improve the production processes for turning natural
resources into consumer goods.

LABO
R.
Labor
represents the
human capital
available to
transform raw
or national

Human capital includes all able-bodied individuals
capable of working in the nation’s economy and
providing various services to other individuals or
businesses. This factor of production is a flexible
resource as workers can be allocated to different
areas of the economy for producing consumer
goods or services.

Human capital can also be improved
through training or educating workers
to complete technical functions or
business tasks when working with
other economic resources.

CAPI
TAL.
Capital has two
economic definitions
as a factor of
production. Capital
can represent the
monetary resources
companies use to
purchase natural
resources, land and
other capital goods.

Monetary resources flow
through a nation’s
economy as individuals buy
and sell resources to
individuals and businesses.

Capital does not only
include money, it also
includes buildings,
machinery, raw materials
and other physical
necessities for the use
of production.

Savings refers to the part of person’s income which is
not spent on consumption. It is therefore involves a
sacrifice because consumption has to be given up for
one to save. Capital is therefore an economic good and
the owner of the capital earns income for its use. This
income is called interest.

For instance, if you
bring your money to
the bank for deposit,
it earns interest
because you are
actually lending
capital to the bank.

Entrepreneurs is
considered a factor of
production because
economic resources
can’t exist in an
economy and not be
transformed into
consumer goods
without it. He is the
person who combines
the other resources

TYPES OF ECONOMIC SYSTEM
The Traditional
EconomyThe Command
EconomyThe Market
Economy

The Traditional
EconomyThis is actually
the subsistence
economy. A
family produces
everything that
it consumes.

The Command
EconomyThis means of
production are
owned by the
government. Its
decisions are
arrived by planners

The Market
Economy
The basic
characteristic
of this economy
is that
resources are
privately owned

It is seldom that a economic
system exists in pure form. The
United States economy is
predominantly market, but it
cannot be denied that there exists
some form of governmental control.
Cuba has best described as
command since its decisions are

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THE PRODUCTION POSSIBILITIES FRONTIER
No.ofpapers(expressedasmillions)
No. of trees to cut (expressed as thousands)

SOCIETY’S
TECHNOLOGICAL
POSSIBILITIES
Since the nation has limited resources, it
has to cope by choosing different
potential bundles of goods. It has to
choose among the production techniques
and who will consume the goods ad services

Inputs refer to the commodities or
services used to produce the good or the
service. Existing technology is used to
combine these different inputs. Inputs
consist of land, labor and capital.

Outputs refer to
useful goods and
services
resulting from
the production
process. These
are goods that
are either

Determine
whether the
picture being

Introduction to Macroeconomics

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