Calzar, Abigail B.
ABM 201 common examples of natural resources
Applied Economics 11/16/18
ASSIGNMENT #1
1. Factors of Production
- is an economic term that describes
the inputs used in the production of
goods or services in order to make
an economic profit.
- They include any resource needed
for the creation of a good or service.
The factors of production include
land, labor, capital and
entrepreneurship.
- These production factors are also
known as management, machines,
materials and labor, and knowledge
has recently been talked about as a
potential new factor of production.
 LAND - has a broad definition as a
factor of production and can take on
various forms, from agricultural land to
commercial real estate to the resources
available from a particular piece of land.
Natural resources, such as oil and gold,
can be extracted and refined for human
consumption from land. Cultivation of
crops on land by farmers increases its
value and utility.
- Land refers to all the
natural resources. These resources are
gifts that are given by nature. Some
are water, oil, copper, natural gas, coal,
and forests. These resources can be
renewable, such as forests, or non-
renewables such as oil or natural gas.
The income earned from land or other
such natural resources is called rent.
 LABOR - refers to the effort expended
by an individual to bring a product or
service to the market. Again, it can take
on various forms.
- Labor, as a factor of production,
involves any human input. The
quality of labor depends on the
workforce’s skills, education, and
motivation. Generally speaking, the
higher the quality of labor, the more
productive is the workforce.
 CAPITAL - In economics, capital
typically refers to money. But money is
not a factor of production because it is
not directly involved in producing a good
or service. Instead it facilitates the
processes used in production by
enabling entrepreneurs and company
owners to purchase capital goods or
land or pay wages. As a factor of
production, capital refers to the
purchase of goods made with money in
production.
- Here capital refers to manufactured
resources such as factories and
machines. These are man-made
goods used in the production of other
 goods. Their use in commercial
production is what separates them
from consumer goods.
 ENTREPRENEURSHIP - is the secret
sauce that combines all the other factors
of production into a product or service
for the consumer market.
-  is someone who takes on risk and
brings the other three factors of
production together. Entrepreneurs
are a vital engine of economic
growth helping to build some of the
largest firms in the world as well as
some of the small businesses in your
neighborhood.
2. Main Branches of Economics
Economics is the study of how modern
economies work. There are two main branches
of economics, macro- and microeconomics, but
there are other divisions. Within these
branches, the production, distribution, and
consumption of goods and services are
analyzed in order to understand how
economies and people within those economies
interact and function.
Microeconomics
Microeconomics focuses on the economic
behaviors of individuals in many aspects,
including decision making, production
distribution, and market results.
Microeconomics, as the name suggests, deals
with small units or individuals or smaller
companies. It deals with concepts such as
markets, which can be for products or services;
production, which exchanges commodities for
consumption in return for money or other
services; cost; specialization, which refers to
divisions of labor; and supply and demand.
Macroeconomics
Macroeconomics studies economic systems on
a larger scale, including national income,
consumption, investment, large-scale
behavioral patterns in regards to economic
growth, employment, inflation, and national and
international trading. It is concerned with an
overall economy and an economy's Gross
National Product, or GNP. Factors such as
stability, means of production, technology all
come into play when analyzing economies in
accordance with macroeconomics.
Positive Economics
Positive economics is a branch which focuses
on objective analysis. This takes the past
economic picture into account when
envisioning and making decisions for the
future. This is opposed to normative
economics, which relies on value judgments
rather than empirical evidence. With empirical
evidence, positive economics can evaluate
how economies have reacted to certain
variables in the past and then apply these
reactions to how future economies will react
under similar situations.
Applied Economics
This is the branch of economics which employs
economic theory into business practice. This
occurs in a range of fields and turns abstract
ideas into concrete practices. Applying theory
to practice helps show the true status of a a major copper mine collapses in South
company's economy whereas pure theoretical America, the price of copper will tend to
thought does not show the true picture of a increase, because supply is restricted.
current or emerging economic position.
Microeconomics could help an investor see
3. Microeconomics Concepts
why Apple Inc. stock prices might fall if
Microeconomics is the social science that
consumers buy fewer iPhones.
studies the implications of individual human
Microeconomics could also explain why a
action, specifically about how those decisions
higher minimum wage might force The
affect the utilization and distribution of scarce
Wendy's Company to hire fewer workers.
resources. Microeconomics shows how and
However, questions about aggregate economic
why different goods have different values, how
numbers remain the purview of
individuals make more efficient or more
macroeconomics, such as what might happen
productive decisions, and how individuals best
to the gross domestic product (GDP) of China
coordinate and cooperate with one another.
in 2020.
Microeconomics is the study of economic
tendencies, or what is likely to happen when
Basic Concepts of Microeconomics
individuals make certain choices or when the
factors of production change. Individual actors
The study of microeconomics involves several
are often broken down into microeconomic
key concepts, including (but not limited to):
subgroups, such as buyers, sellers and
business owners. These actors interact with
• Demand, supply and equilibrium: The
the supply and demand for resources, using
theory of supply and demand help determine
money and interest rates as a pricing
prices in a competitive market. In a perfectly
mechanism for coordination.
competitive market, it concludes that the price
demanded by consumers is the same supplied
The Uses of Microeconomics
by producers. That results in economic
equilibrium.
As a purely normative science,
microeconomics does not try to explain what
• Production theory: This is the study of
should happen in a market. Instead,
production — or the process of converting
microeconomics only explains what to expect if
inputs into outputs.
certain conditions change. If a manufacturer
raises the prices of cars, microeconomics says
consumers will tend to buy fewer than before. If
• Costs of production: This theory states that - The total value of output (goods and
the price of goods or services is determined by services) produced and income
the cost of the resources going into making it. received in a year by domestic
residents of a country. It includes
• Labor economics: is the need to understand profits earned from capital invested
the functioning and dynamics of the wage labor abroad. 
market. It looks at the suppliers of labor
services (or workers), the demand for this 3. GROSS DOMESTIC PRODUCT (GDP)
service (employers), and tries to understand - The total value of output (goods and
the pattern of wages, employment and income. services) produced by the factor of
production located within the

4. Macroeconomics Concepts country’s boundary in a year. The

- Is a branch of economics that deals with the factor of production may be owned

performance, structure, and behavior of a by any one-citizens or foreigners. 

national or regional economy as a whole. 

- It studies about aggregated indicators such as 4. NATIONAL INCOME 

GDP, unemployment rates, and price indices to - Total value of final goods and

understand how the whole economy functions.  services produced by the nationals of

- Develop models that explain the relationship the country for a particular period of

between such factors as national income, time, usually a year.

output, consumption, unemployment, inflation,

savings, investment, international trade and 5. FULL EMPLOYMENT 

international finance.  - Full employment occurs when the

economy is producing to its

Macroeconomics Indicators maximum sustainable capacity,

1. ECONOMIC GROWTH using labor, technology, land, capital

- An increase in economic activity. It is and other factors of production to

often measured as the rate of their fullest potential. 

change of GDP. - In a situation of full employment,

- Negative growth is associated with some workers may still be

economic recession and economic unemployed if they are temporarily

depression between jobs and searching for new

employment (this is called ‘frictional

2. GROSS NATIONAL PRODUCT unemployment’)

 6. INFLATION 
- Inflation may be defined as a
sustained increase in general price
 
level of goods and services in the
economy

Differences between Microeconomics and Macroeconomics

Microeconomics Macroeconomics
        Studies individual income        Studies national income
       Analyzes demand and supply     Analyzes total employment in
of labour     the economy
       Deals with households’ and      Deals with aggregate
firms’ decision decisions
       Studies individual prices       Studies overall price level
       Analyzes demand and supply     Analyzes aggregate demand
of goods and aggregate supply