Resource Allocation and Economic Systems
Author: Author
Description for Resource Allocation Here.
Resources
| Videos | |||
|---|---|---|---|
| Crash Course | video - Command, mixed, and market economies | ||
| KhanAcademy | video - what is scarcity, scarce vs free resources | ||
| LumenLearning | reading - scarcity, factors of production | ||
Introduction
The study of economics is the study of how society manages its scarce resources. This includes:
- what to buy
- how much to work, save, and spend
- how much to produce
- how many workers to hire
- how to divide society’s resources between national defense, consumer goods, protecting the environment, and other needs
A scarce resource is a resource which is limited in quantity. Examples include land, labor, food, and time. Scarcity occurs because humans have unlimited wants for goods and services but a limited ability to produce them.
The goal of economics is to figure out how resources can be used to their fullest potential. To do this, we must often make tradeoffs. A tradeoff is when you sacrifice one thing to save your resources for something else. Examples:
- Going to a party and therefore having less time to do your homework.
- Spending money on improving your business instead of on upgrading your house.
- Taking a day off work and relaxing instead of earning a day’s wage.
The factors of production, which are the resources used to produce goods and services, include:
- capital - the tools, equipment, machines, and buildings used in production.
e.g. office buildings, computers, lawn mowers, desks - labor, also called human capital - the workers that put in physical and mental effort.
e.g. a construction worker building the sidewalk, a professor giving a lecture, a doctor diagnosing a patient - land - the natural resources used in production.
e.g. natural gas, oil, water.