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Economics Problems, Factors of Production, Economics Systems and the LDR
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Economics is the social science that describes the factors that determine the
production, distribution and consumption of goods and services
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Economics is about the activity of combining
resources in order to produce output that will meet our needs and wants
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As resources are scarce, and wants are infinite then
economics problems appear
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There are two types of economics, these types are microeconomics and
macroeconomics, Microeconomics is the type of economy that concentrates on
the behaviour of individuals entities such as market, households, firms and the
impacts of those choices have on individual markets, this type of economy also
studies all the impacts affecting different markets Microeconomics ask
questions such as; how they affect? , Why?
Macroeconomics: This type of economy concentrate and is concerned about
the overall performance of the economy, questions such as; what is the effect of
unemployment on economic growth? They also ask questions like, what’s the
impact of inflation and defilation, distribution and the exchange and
consumption of goods and services
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We need some things just to survive such as water, food, air, clothes,
shelter and warmth
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Governments focus on fulfilling needs and wants of their citizens which means
they also have lots of needs and wants, As they want to provide goods and
services to citizens so citizens feel protected and safe within the country they
live in , governments provides services such as education , some countries such
as UK provide free education for everyone from the age 3 to 18 so everyone have
the opportunity to study and prosper , governments also provides health
services such as hospitals, dental clinics and medical centres
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There are so many needs and wants that the governments have, they provide a
lot of goods and services to fulfil these unlimited needs and wants
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The basic economic problem arises when resources are limited, but then again
human wants are unlimited
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Moreover scarce resources in economics means that there are only a limited
number of resources to produce goods and services these limited resources
could be ;raw materials, machineries, land , oil, skilled workers, factories,
buildings and much more
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We can see the complex of economic problems in the world by questions on
what economics should do to make efficient choices that will affect everyone
around, they have questions such as; should they use a piece of land to build
more hospitals, houses or schools? Should they cut down forest, so they can
make way for agriculture or should they make way to build more houses?
In economics the opportunity costs appears when deciding between two
choices to use the scarce resources for, the first choice might be better but the
second choice will always be there as an opportunity
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This can be done by using less raw materials, less employees and replacing
employees with machineries
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They do
this by making three choice on how to allocate them, these choices will be;
what to produce, how to produce it and for who to produce it
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This
curve is drawn
when an
economy
assumes they
can only
produce two
goods, this
curve is also
drawn when an
economy think
that the factors
of production are fixed and they won’t be able to produce beyond , or more
goods than the ones predicted , this curve help them see whether they will be
efficient or not to produce more goods
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In this graph the production points are A, where the point C and B are only
achievable but not efficient, on the other hand the point beyond the curve are
unreachable
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Moreover if we move between the points of the curve , this involve a trade-off
that the economy might do by giving up on some goods to get more from
producing other type of goods that are more efficient for the economy than the
ones given up on
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The economic growth happens when the production expands by changing their
production equipment to new technology rather than increasing labour, which
will expand the production by developing new goods and services but with
improved ways of producing goods for consumers, this will also save work and
time to production departments, by developing the production equipment will
also increase the capital of an economy and grow the capital resources of
production
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The quantity of products and services within the economy of a
country that can be produced are limited because the available resources that
the economy has are scarce
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Factors of Production: are resources used by the economy , these factors are
used by individuals, businesses and people to produce goods and services ,
these factors are divided into four types: labour, capital, land and
entrepreneurship
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Land is the first factor of production , this includes any natural resources used
to produce products and services for consumers, is not just about the
production that comes from land, but whatever that can be produced from the
land such as; oil, forests, natural gas, water, petroleum and sea
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It can be sea where the fish is extracted and
converted in food and products for consumers, forests, where trees are cut to
make different types of wood and used for construction
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The owners of land resources , in return for
their resources for production to the economy gets an income from renting
them the resources
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Labour
resources is all the work done by any employee, such as a customer assistant
working in a restaurant that works by making customers buy their food and
come back to the restaurant and make profit to the restaurant but also make
the customer happy so they can feel good
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Another examples are ; painters, teachers,
pilots and more
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Everyone working earns an income from labour
resources which are salaries and wages
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Moreover without workers there will not be production of goods and services,
the amount of labour available to an economy can be increased by employing
more people or by increasing the hours per week an employee should work,
which will increase production
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Some
employee also have education which will make them more productive to the
economy this is also called human capital as workers are used to increase the
economy’s capital and production
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Delivery vans
used as distribution of goods and services over the world and deliver products
to supermarkets and consumers faster, hammers were used to cut down the
trees so they can produce woods and use it for construction, but now there are
more developed machinery used to cut down trees, hammers are also used in
buses as an emergency in case something happens inside the bus and the door

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blocks somehow ,so people can use the hammer to cut the window , more
examples are; equipment, vehicles, production facilities, etc
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Entrepreneurship is the fourth factor of production, entrepreneurs are
considered a factor of production because economic resources might be but
without someone with ideas to produce goods, the economic resources might
not be useful
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Therefore Entrepreneurship is measured as a factor of production as somebody
with the skills and qualities necessary must manage roles of collecting,
allocating and distributing consumer goods to other companies in the
economy or individuals
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The economic systems are used to allocate all the resources by answering the
essential questions that all countries ask when talking about economy, such as
; What to produce, how to produce it and for whom to produce it? The three
main economic systems are; Market economies, planned economies and mixed
economies
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Which means that what products and services to produce are
determined by consumers preferences, how to produce the products and
services for consumers is decided by producers own interest and whom gets the
products and services are influenced by the purchasing power of consumers
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Moreover a free market economy is an economy in which choices concerning
investment, production, and distribution of their goods and services are based
on supply and demand, and when the prices of their goods and services are
determined in a free price system
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The disadvantages of having a free market economy is that there is less control
over resources, bad use of scarce resources in bad times for the country,
unorganized allocation of resources, lack of provision as a result of bad
allocating scarce resources, some quality goods might not be consumed and
advertising of the products and services disorients consumer’s choice of buying
products
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Command or planned economies have some advantages over free market
economies, specifically in organizing the scarce resources of their country at
hard times such as crisis, natural disaster or war, free markets are also
sometimes unsuccessful at allocating resources efficiently, so in planned
economies the allocation of resources is more organized and the government
also organizes better the scarce resources in hard times for their country
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The advantages of a planned economy is that there is more control over the
resources, the government can be blamed if something goes wrong as they
control everything, there is more wealth and distribution of products and
services ,there is no duplication of goods and services allowed by the
government, goods are provided to all consumers from everywhere
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The countries that have a planned economy where the governments has most
of the power are Zimbabwe, Cuba and North Korea
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This type of economy may have a
different private sector where the resources are allocated by market forces
such as the groceries of UK
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In many sector the resources of a mixed

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economy are allocated by combining the planning and the markets, such as
health care services where there is both private and public
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The Advantages of having a mixed economy is that the economy is public and
private, they both have roles within the economy and the resources are
allocated, the competition of consumers keeps the prices at a low level,
consumers can decide, and all the incompetent businesses performance is
controlled by the government
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Therefore the countries that have a mixed economy are the most industrial
countries such as France, United States, Cuba, United Kingdom, China, Iceland
and Russia
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Moreover the LDR enables a business to see where the business makes profit to
increase the total production of the business by increasing a variable input
such as labour, this law also enables the business to see at which point the
business is not profitable and by looking at the marginal output the business
can see how much a worker contributes to the total production of the business
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This law is also based on the fact that if a business add more units of variable
factors or inputs to a fixed amount of capital and land, this output could rise at
the beginning and then fall which will affect the economy in a bad way
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Everyone has been to buy a
coffee or a hot chocolate or anything to eat in the morning from a coffee shop ,
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I always wondered why there is always a few people handling customers in the
morning in a coffee shop or any shop I went to , the most mornings, there are
only a few staff , I didn’t know why managers don’t schedule more staff for
morning time until I have discovered a café study case talking about the law of
diminishing returns within their coffee shop
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In this case I have discovered that the
input factor that they can change in a short time is labour input
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After the shops employs the fourth worker to their coffee shop, the law of
diminishing returns sets in because with four employees, they sell over 350
cups of coffee and as the labour increases more coffee cups are sold
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The output still increases as the
marginal increased from four to five employees, by employing the fifth worker
the output only increases with 75 cups of coffee
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So by employing more
employees the coffee cups sold might increase but little, that’s why businesses
uses the law of diminishing returns to see where their business increases on

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profit and where not , or whether their production will increase by increasing
labour or not
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I have used the following resources for my research;
http://study
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html
https://www
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org/education/economic-lowdown-podcast-series/episode-2-factors-ofproduction
"diminishing returns, law of
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2015
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com
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2015 ...
com>
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econmentor
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html
R
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of Economics, University of Regensburg and Inst
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journals
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com/economic-systems/
Teacher’s handouts

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Title: Economics Essay
Description: This essay is about economics; Economics problems, factors of production, economics systems and the law of diminishing returns, definitions of economics and much more.

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