introduction to principles and practices of economics

 market structures refers to how different industries are organized are organized based on the number of firms, type of products and easy of entry into the market

                            Types of market structures

                 a)perfect competition

characteristics; 1)many small firms

                          2)no control over price

                         3)easy entry/exit

                          4)consumers have a perfect information

               b)monopolistic competition

       characteristics; 1)product differentiation through branding quality etc

                                2)firms compete on non-price factors

                                3)some control over price

                c)oligopoly

characteristics;1)independence btw firms

                        2)possibility of collusion or price wars

                      3)high barriers due to cost or regulations

          d)monopoly

characteristics;1)single seller

                       2)high prices and restricted output

                        3)lack of competition may reduce efficiency

Economics identifies four basic resources used to produce goods and services. These are called the factors of production . They include land, labor, capital, and entrepreneurship. Every economy must manage and allocate these resources efficiently to meet its needs.

          2.1 land, labor, capital and entrepreneurship

       1)  land

.Refers to all natural resources used in production.

.includes minerals, water, forests and land area.

           2)capital

.man-made tools, machines and buildings used in production

.Excludes money unless it's used to buy productive resources

                 3)labor

.the human effort(physical and mental ) used to produce goods, example ;teachers engineers etc.    

          4)entrepreneurship

. the skills and willingness to organize the other three factors, take risks and innovate.

         2.2Rewards for factors of production

each factor earns income in return for it's contribution to production process

.Rent- for land and natural resources

.wages-for labor and services provided by workers

.interest- for the use of capital or investments

.profit- for entrepreneurial risk taking and innovation.

Economics is the study of how individuals, business, government and societies make choices about how to allocate scarce resources to satisfy unlimited wants and needs.

  since resources like time, money, labor and raw materials are limited , economics helps us understand how people decide what to produce, how to produce it and for whom it is produce.

economics have 2 main branches;   

                a)microeconomics: focuses on individual and business decisions (e.g., pricing, supply, demand.)

                  b)macroeconomics : looks at the economy as a whole (e.g., inflation, unemployment, GDP)

         distinctions between needs and wants