Economic agents and resources Who and what is involved in the economy?

What is used to satisfy needs and wants? Businesses combine the four factors of production namely: L _ _ _ _ L_ _ _ _ _ C_ _ _ _ _ _ E_ _ _ _ _ _ _ _ _

Land Any natural resource that can be used or extracted from the earth eg … Some land has a market price eg crude oil others have a reward paid to their owner eg rent on a field Renewable resources Non renewable resources IQ -Name three challenges to land resources

Labour Workforce resources that are used in production of goods and services eg… Ideally labour as a factor is mobile: Geographically when… Occupationally when… What might create immobility of labour? IQ – what might be done to reduce this barrier?

Capital Any human made resource used in the production of goods and services eg… Additional forms of capital are Infrastructure – roads, power and communication links, airports Finance – the financial resource that allows for other resources to be purchased Intellectual capital – inventions and new ideas that can be owned by companies or individuals There are 2 types of goods made: Capital goods – made for firms, likely to improve living standards in the future. Measured by investment in fixed capital formation these goods depreciate over time –called fixed capital consumption Consumer goods – made for consumers contribute to living standards now IQ – which of the above is preferable from a long term economic perspective?

Enterprise The risk taker who combines all the other factors in order to produce goods and services. The reward to this factor is…. The entrepreneurial function involves raising finance to establish and run the new venture. For sole traders and partnerships the owners are the entrepreneurs For Plc companies the investors are not the same as the managers and directors who run the business IQ – why is this less well developed in the UK compared to other countries?

Which factor? A forest of long fibre spruce A woman who starts her own marketing business Mineral deposits Livestock Planed timber Gutted fish Electrician Partnership of electricians

Alternative uses Land can be used for… Labour has transferable skills like… Capital can be used for a variety of business uses eg… Entrepreneurs can adapt to different businesses eg… Opportunity cost – the loss of benefit from option 2 when option 1 is chosen eg If the NHS decide to buy 4 MRI scanners we lose the benefit of If a chocolate business invests in a new sales office then… The government sends aid money to deal with humanitarian crisis.. If a worker starts their own business then… Because wants are unlimited but resources are scarce choice involves sacrifice – a fundamental concept in economics!

Economic Agents are assumed to be rational and maximising Key aims Tools and actions Consumers /Households Firms/Businesses Government

Economic Agents are assumed to be rational and maximising Key aims Tools and actions Consumers /Households Fulfil needs and wants eg food clothing shelter/ holidays phones and entertainment Utility maximisation – the highest level of satisfaction from a given set of resources Working Spending Firms/Businesses To survive, grow, make profit, provide products and services for revenue Long run profit maximisation Make Sell Hire Spend Invest Government Maximise social welfare – encourage people into work, control macro economic price level, oversee lending market, correct market failure Tax Regulate Set legal framework

Who should benefit from production? Owners or workers? Consumers or Government? People or the environment?