Regardless of your politics, you should probably know every one of these terms. If you don't that's ok... We're here to learn!
1/The Economic Problem
2/ Producing Means Producing Added Value
3/ How Does Market Work?
4/ Companies Play a Major Role in the Creation of Added Value
1/ The Economic Problem
Economics - How best to satisfy Infinite Desires using Limited Resources.
Everyone has basic needs in life: food, water, a place to live, and so on.
But everyone also has an infinite list of things they want: designer clothes, smartphones, holidays, houses...
These facts lead to the basic economic problem:
HOW can the available scarce resources be used to satisfy people's infinite needs and wants as effectively as possible?
The scarce resources (inputs) used to make the things people want and need (outputs) can be divided into factors of production :
- Natural Resources
- Labour Factor
- Capital Factor
Human societies have imagined 3 main ways of using these scarce resources in order to best satisfy human wants:
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2/ Producing means producing added value
Production = the processes and methods used to transform tangible inputs (raw materials, semi-finished goods, subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services. Resources are used in this process to create an output that is suitable for use or has exchange value.
= the increased worth that a business creates for a product
= an amount added to the value of a product or service, equal to the difference between its cost and the amount received when it is sold. Wages, taxes, etc. are deducted from the added value to give the profit.
When economists make a number of simplified assumptions about how the economy, or some part of it, behaves, and then see what this implies in various different scenarios: this is modelling.
How to calculate added value ?
intermediate consumptions (expenditures)
this AV is used to pay the production factors / Factors of production
capital factor = MONEY or assets put to economic use, the life-blood of CAPITALISM. Economists describe
capital as one of the four essential ingredients of economic activity, the FACTORS OF PRODUCTION, along with LAND, LABOUR and ENTERPRISE.
Production processes that use a lot of capital relative to labour are CAPITAL INTENSIVE; those that use comparatively little capital are LABOUR INTENSIVE.
Capital takes different forms. A firm's ASSETS are known as its capital, which may include
One of the FACTORS OF PRODUCTION, with LAND, CAPITAL and ENTERPRISE.
Among the things that determine the supply of labour are the number of able people in the POPULATION, their willingness to work, labour laws and regulations, and the health of the economy and FIRMS.
DEMAND for labour is also affected by the health of the economy and firms, labour laws and regulations, as well as the PRICE and supply of other factors of production.
= revenues for capital owners
especially the share holders
3/ Market or non market output ?
Free market is a system in which decisions regarding resource allocation, production, and consumption, and price levels and competition, are made by the collective actions of individuals or organizations seeking their own advantage through profit.
In all market economies, however, freedom of the markets is limited and governments intervene occasionally to encourage or dampen demand or to promote competition to thwart the emergence of monopolies. Also called free economy, free market, or free market economy.
NON MARKET PRODUCTION
In economics, nonmarket forces are those acting on economic factors from outside the market system. They include societal institutions and organizations – economic, political, social and cultural – seeking a collective interest, such as solidarity. The non market organizations don't seek their own adavantage through profit.
Non market forces could include services of:
4/ The firms: major actors of the market economy
Let's take the example of Nike...
Does Nike produce high or low added value outputs ?
Write a short answer to this question by using as many notions as you can :
Ongoing battle between the sneakers giants
Learn useful words to communicate your thoughts about new technologies, with that quizlet.