Dear Father, Looking at past events, you had talked me into taking business and economics as a subject. Furthermore, now that I have taken it and understood better, I like it a lot more. In the beginning of the year, I had a very negative attitude about this. In addition, my teacher’s explanations are understandable and I am now beginning to take a liking towards economics. Thus, I am able to relate more towards the incidents that happen in our daily lives. I also understand why you tell me to spend money wisely. In the past few weeks I have learnt a lot about economics and its basic problems.
To further prove my point, I want to tell you what I’ve learned. It’s often said that the central purpose of economic activity is the production of goods and services to satisfy our changing needs and wants. One of the main things that we’ve learned about is scarcity. We’re continually uncovering new and different needs and wants which producers attempt to supply by employing factors of production. This is what leads to scarcity, which means that we all have to make choices. If there were no scarcity there would be no real economic problem. People have to make choices according to their needs (limited) not their wants (unlimited).
For example, over six million people travel to London each day and they have to make choices about when to travel, whether they take the bus, or if they wish to walk. Opportunity cost plays a very big role on scarcity. Scarce resources have alternative uses, which means that it is the cost of the next best alternative. There is a well-known saying in economics that, “there is no such thing as a free lunch! ” This means that even if we are asked to pay for something, it involves scarce resources, scarce resources are used up in the production of it and there is an opportunity cost involved.
A real life example, a person makes $400 as an attorney and is considering paying someone $1,000 to paint his house. If he decides to do it himself it will take him four hours. His opportunity cost for doing it himself is the lost wages for four hours or $1,600. Moving on to third thing I learnt about economics so far are the factors of production. Firstly, land is a natural resource. Examples of biotic natural resources would be trees and fruits. There can also natural resource that can be grown as crops such as, basil and cotton. There are also resources that come from the sea such as seaweed.
In addition to these natural resources you can also find abiotic resources like, gold and copper. Moving on to the next factor of production is capital, which are man–made resources. In particular, factories play a huge role with this. This is because factories are where almost everything is made. Thirdly, labor resources are another factor of production. For instance, doctors and nurses. Lastly we have enterprise resources, which can also be known as entrepreneurs, basically people who manage other people. For example, you are an entrepreneur because you manage your own business so you are an enterprise resource. Sincerely, Me
