Natural resources
Items provided by nature that can be used to produce goods and to provide services are called natural resources. Natural resources are found in/or on the earth or in the earths atmosphere. Examples of natural resources on the earth are fertile land, vegetation, animals, and bodies of water. Minerals and petroleum are examples of natural resources that are found in the earth. Atmosphere resources include the sun, wind and rain. A natural resource is considered a factor of production only when it is used to produce goods and to provide services.
Human resources
Anyone who works is considered a human resource. Any human effort that is exerted in production process is classified as a human resource. The effort can be either physical or intellectual.
Capital resources
The money and capital goods are used to produce consumer products are called capital resources. Capital goods include the buildings, structures, machinery, tools that are used in the production process. Department stores, factories, industrial machinery, dams, ports, wrenches, hammers, surgical scalpels are all examples of capital goods. Economists make an important distinction between capital goods and consumer goods. Capital goods are the manufactured resources that are used in producing finished products. Consumer goods the goods and services that consumers buy. Some products can be either capital goods or consumer goods, depending on how they are used. A bicycle purchased for personal use is a consumer good. The same is not true when the bicycle is purchased by a New York messenger service. Because the messenger service will use the bicycle to make deliveries to provide a service the bicycle is considered a capital good.
Technology
The use of science to create new products or more efficient ways to produce products is called technology. Technology makes the other factors of production natural, human and capital resources more productive. Technological advances in the computer industry, for example, have increased efficiency in the workplace.
Entrepreneurship
The risk-taking and organizational abilities involved in starting a new business or introducing a new product to consumers are called entrepreneurship. The goal of entrepreneurship is to create a new mix of the other factors of production and thereby create something of value. The entrepreneur is a person who attempts to start a new business or introduce a new product.
Vocabulary
Capital goods ,
Capital resources ,
Consumer
Consumer goods ,
Economics ,
Entrepreneur
Entrepreneurship
Factor of production
Fee (for a fee) , ( )
Goods
Human resources , ,
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Natural resources
Need ,
Producer
Product ,
Production -
Purchase , ; ,
Resource ,
Satisfy
Scarcity ,
Service ,
Survival
technological advances
technology ,
want , ,
Exercises
1. Fill the gaps with the words and expressions (Note: There are 2 expressions which you dont need to use): producers, factors of production, human resources, technology, wants, service, capital resources, consumer goods, entrepreneur, economics
1. The study of the choices people make in a effort to satisfy their wants and needs is called _______________________.
2. A _____________is an action or activity done for others for fee.
3. The people who make the goods and provide services that satisfy consumers wants and needs are called__________________.
4. _______________are those goods or services that people consume beyond what is needed survival.
5. Resources that can be used to produce goods and services are called __________________.
6. The money and capital goods that are used to produce consumer products are called __________.
7. The use of science to create new products or more efficient ways to produce products is called _________________.
8. The ________________ is a person who attempts to start a new business or introduce a new product.
2. Translate the following sentences.
1. , .
2. , , .
3. , , .
4. -, .
5. , , .
6. , , .
WHAT IS ECONOMICS?
Economics is the study of how goods and services we want get produced, and how they are distributed among us. This part we call economic analysis. Economics is also the study of how we can make the system of production and distribution work better. This part we call economic policy. Economic analysis is the necessary foundation for sound economic policy.
Another, slightly different, definition of economics, favored by many economists, is this: Economics is the study of how our scarce productive resources are used to satisfy human wants. This definition emphasizes two central points. First, productive resources are scarce, in the sense that we are not able to produce all of everything that everyone wants free; thus we must economize our resources, or use them as efficiently as possible. Second, human wants, if not infinite, go so far beyond the ability of our productive resources to satisfy them, that we face a major problem in trying to make the best possible use of our productive resources so as to satisfy the largest possible number of these wants. Indeed, most major economic problems arise from this fact of scarcity, and the need to make effective use of our resources to satisfy our wants. If there were plenty of everything for everyone to have without working or paying for it, there would be no economic problems.
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DOING BUSINESS
Types of business
Objectives of business
Business organizations are established to meet wants in society. Private businesses are formed mainly to provide for material wants (i.e. goods and services) and commercial wants (i.e. banking, insurance) in society. Government organizations, on the other hand, tend to satisfy societys desires for defence, law and order, education and social welfare. Organizations are thus established to meet wants in society. In meeting these, organizations will set very definite and clear aims, e.g. a manufacturing firm will want to stay in business and make a profit. The aims of an organization are normally decided by the board of directors, or in the case of public organizations by government ministers. The most common forms of private business organizations are sole proprietorships, partnerships and corporations.
Sole Proprietorships
A business owned and controlled by one person is a sole proprietorship. Sole proprietorships are the oldest, simplest and most common of all types of business. Because the financial resources available to one person often are limited, sole proprietorships tend to be enterprises that require small amounts of capital to start and operate. For example, many doctors, dentists, lawyers organize as sole proprietors to provide professional services.
Partnerships
A partnership is a business that is owned and controlled by two or more people. As in the case of sole proprietorships, partnerships are concentrated in business that require relatively small amounts of money to start and operate. A partnerships begins when two or more people agree to operate a business together. Partnership can be general or limited. In order to avoid later conflicts, the partners usually formulate a written agreement called a partnership contract. A partnership contract outlines the distribution of profits and losses. It details the specific responsibilities of each partner and includes provision for adding or dropping partners and dissolving the partnership.
Corporations
A corporation is a business organization that is treated by law as if it were an individual person. A corporation can do everything that a sole proprietorship or a partnership can do. A corporation, however, is owned by stockholders. Stockholders are individuals who invest in a corporation by buying shares of stock. Stocks are the certificates of ownership in the corporation. Stockholders invest in a corporation in order to make a profit. A corporation may be either publicly owned or closed. A publicly owned corporation allows its shares to be purchased by anyone who chooses to invest in the business. Most corporations today are publicly owned. A closed corporation is owned by a limited number of shareholders. People outside of this limited group may not buy shares in the corporation.
Aims of private organizations
Profitability is the main aim of private organizations but its important to realize that a business will have other aims. These include: 1. Survival: In times of economic difficulty such as recession surviving will become an important short-term aim of the firm. 2. Growth: not all firms want to grow continually but growth is closely associated with survival. For firms in highly competitive situations growth and development are the only way to ensure survival. 3. Image: how the public at large views a company can be particularly important, and to this end companies have public relations departments that have specific responsibility to improve the image of the company.
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Vocabulary
Competitive
Corporation ,
Distribution
Establish ,
General partnership ( )
Growth ,
Limited partnership ( )
Make a profit
Meet wants
Partnership ,
Partnership contract
Private business
Profitability , ,
Provision of a contract
Public organization
To set an aim
Shareholder
Shares
Social welfare
sole proprietorship
stock ; ;
stocks
stockholder , ;
survival ( )
to this end
Exercises
1. Translate into English and then use them in Passive:
1. , . 2. . 3. . 4. . 5. . 6. .
2.Match the expressions
1. Managing Director 2. General Manager 3. Financial Director 4. Personnel Manager 5. Training Manager 6. administrative department 7. research and development department 8. production division
9. finance department 10. planning department 11. purchasing department 12. accountant 13. chairman 14. to report to 15. to employ
a. b. . d. . f. g. - - h. i. j. k. l. m. n. - .
Entrepreneurs, plants, firms and industries
Business enterprises are called firms. John Brown and his family run a farm, the farm is a firm. United States Steel is a firm, with steel mills in many cities, with iron and coal mines, with ore ships on the grate Lakes. The important characteristic of the firm is that it is owned and controlled essentially as a unit, however diverse its parts.
The function of making fundamental policy decisions in a firm is generally called entrepreneurship. The entrepreneur decides when to establish a firm, what goods to produce, what price policies to follow, how the concern will be financed and so on. A firm is thus a business unit under one coordinated entrepreneurship.
In the independent corner grocery store, the proprietor is the entrepreneur. He decides whether to borrow funds to remodel his store, what prices to set on his merchandise. In bigger business. It is harder to pick out the entrepreneur. The functions of entrepreneur are performed in a coordinate way by the various individuals and groups concerned.
A plant is a building or a group of buildings, along with other more or less fixed physical equipment, that are used together in producing something- such as a shoe-manufacturing plant or an auto-assembly plant. The ford Motor company is a firm with plants in Dearborn, St. Louis, Kansas City, and so forth. John Browns farm, on the other hand, is a firm with only one plant.
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An industry is harder to define. Usually we use the word to mean all the producers of any commodity. Farmer Brown is part of the wheat industry if he produces wheat, part of the corn industry if he produces corn: he may be in both simultaneously. General Motors is part of many industries: it produces a wide range of autos, trucks, diesel engines, refrigerators, and hundreds of other products.
MARKET STRUCTURE
A market can be defined as any form of contact between buyers and sellers for the purpose of buying and selling goods and services. Markets always have two sides: the demand side, composed buyers, and the supply side, made up of sellers. Markets may be local, national and international. A market usually has 4 elements:
1. Buyers people wishing to acquire goods and services.
2. Sellers people wishing to sell goods and services.
3. The goods and services, which are going to be exchanged.
4. A means of payment that includes cash, cheque, credit, standing order and hire purchase.
The demand for a product is the amount of a good that people are willing to buy over a given time period at a particular price. For most goods and services the amount that consumers wish to buy (the quantity demanded) will increase as price falls. The desired demand is the information showing the amount of the product that consumers are willing to buy at different prices not what they actually do buy. The demand for a product is not only influenced by price. An individual may be influenced by factors such as personal tastes, the size of income, advertising, the cost and availability of credit. The total market demand will be affected by the size and age distribution of the population and government policy.
The quantity of goods and services that producers offer at each price is called supply. While demand is concerned with the buying side of the market, supply is concerned with the firms or producers side of the market. Unlike demand, the quantity supplied of a good will increase as price rises. The supply of a product is not only influenced by price. Supply will be affected by anything that helps or hinders production or alters the costs of production.
Consumers have a wide variety of choice in how they spend their income, and there is a large quantity and many different types of goods and services that the consumer can buy. One difficulty that confronts a firm is to decide what produce. Satisfying the wants and needs of consumers and anticipating these wants can make the difference between success and failure in business. Some things, such as food, are essential. Food is an example of a single-use consumer good. Most people, having satisfied their needs, can attempt to satisfy their wants by the purchase of items such as cars, TVs, microwaves ovens and so on. They are sometimes called consumer durable products. Alternatively, they may purchase services such as dry-cleaning, haircuts, trips to the cinema.
Today, a successful company is one, which tries to discover what the consumer wants or could be purchased to buy and then makes that product and sells it at a profit. Such firms are said to be market-oriented. In a market-oriented firm one of the functions of marketing department is to find out consumer requirements. This is in complete contrast to a product-oriented firm, which first produces a product and the tries to sell it in the hope that the consumer will buy it.
Market research involves studying the market to discover exactly what the customer really wants. Companies collect information in order to build up a picture of consumer requirements. It can come from two main sources.
1. Primary information is information that is not already available. One of the techniques used to collect this information here is field research questioning consumers directly about their tastes and preferences.
2. Secondary information is information that is already available to the firm. It can come from a variety of sources, such as government statistics and business and trade publications. Gathering information this way is called desk research.
Identifying the tastes and preferences of consumers is not simple because there are many different types of consumers with different tastes. Firms normally try to build up a consumer profile, i.e. the age, sex, occupation and location of its consumers.
Every firm usually possesses its own internal information about the popularity of its products and about its own sales. This information, although useful, may be of limited value, since it tells the firm nothing about the total size of the market, competitors products and prices, or consumer preferences. Consumer research can be carried out by the Market Research Department of a company or by Market Research Centers, which specialize in providing this service for others.
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Market researchers collect, analyze and interpret data to provide companies with information about the needs and desires of the buying public, they develop forecasts of consumer motivations and buying habits on the basis of these forecasts, they propose strategies for the marketing campaign of current products and suggest areas for market expansion.
Vocabulary
Availability of credit
Cash ,
Consumer durable products
Consumer requirements
Demand
Desk research
Field research
Forecast
Hire purchase
Local market
Market expansion -
Marketing campaign
Market-oriented/product-oriented - /
Purchase on credit/for cash /
Single-use consumer goods
Standing order
Supply
Total market demand
Exercises
