...Economics I Chapter 1: Economics for business ‘David Begg and Damian Ward – Economics for business’ 1.1 What is economics? Economics how individuals, firms, governments and economies deal with the problem of infinite wants and finite resources, it is the study of how the society resolve the problems of scarcity. Microeconomics: addresses the various market influences that impact upon a firm’s revenues and costs. Macroeconomics: addresses the economy-level issues which similarly affect a firm’s revenues and costs. Infinite wants: limitless desires to consume goods and services (big house, luxury car, designer shoes). Finite resources: limited amount of resources that enable the production and purchase of goods and services (salary, consulting fees, royalties from book, generous friends). Factors of productions: are resources needed to make goods and services: land (oil, gas, base metals), labour (China/India or Europe), capital (machinery, computers, office spare, retail shops) and enterprise (brings land, labour and capital together and organize them into business units that produce goods and services with the objective of making a profit, like shareholders). Production possibility frontier it shows the maximum number of products that can be produced by an economy with a given amount of resources. This illustrative tool can be used to highlight crucial economic concepts: Finite resources with a fixed quantity of resources an infinite amount of beer, or pizzas, cannot be...
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