RESOURCES

These are goods/ inputs out of which man produces goods and services to satisfy his wants.

OR

Resources are tangible and intangible things including human labour that man makes use of to satisfy his unlimited wants.

Examples of human resources include labour and entrepreneur.

Resources are also known as factors of production, factor inputs or means of production.

Resources can either be renewable or non-renewable.

Renewable resources are those resources which can be regenerated e.g. forests.        

Non-renewable resources are those resources which cannot be regenerated e.g. minerals.

GOODS/ COMMODITIES

These are tangible items which satisfy human wants directly like clothes.

TYPES OF GOODS

a)     Producer/ capital/ goods/ goods of second order.

These are goods used by producers to transform raw-materials into finished goods. These goods are used in the production of other goods. They satisfy human wants indirectly for example factory machines, buildings, raw materials, ovens, blender.

b)     Consumer/ final goods/ goods of first order.

These are goods which are meant for final use by the final consumer and are capable of providing direct satisfaction to man’s wants E.g. salt, soap, foodstuffs, books, clothes, cars, computer.

c)     Intermediate goods.

These are goods which are produced but have not reached their final stage of production. That is they still need more processing in order to obtain a final good e.g. sugar canes are intermediate goods in the making of sugar, sugar in the making of sweets, wheat flour in the making of bread.

d)     Durable goods.

These are goods which are capable of giving a long term service e.g. buildings, furniture, machines, television set, computers.

e)     Perishable goods.

These are goods whose capacity to satisfy human wants ends after a short period of time i.e. they go bad after a short period of time e.g. vegetables, bread, meat, chapatti, milk.

f)      Private goods.

Are those enjoyed solely/ exclusively by an individual such that one’s consumption excludes others. A non owner must always seek permission from the owner before using the good E.g. personal cars, clothes, houses, laptops, textbooks, radio.

Characteristics of private goods

ü They are excludable i.e. owners prevent those who have not paid for it from using the good/ no free – riders.

ü There is rivalry in their consumption i.e. consumption by one necessarily prevents that of another.

ü They involve direct payment to be consumed.

ü They are scarce which causes competition for them

g)     Public goods.

Are those which when provided, usually by the state, for a particular individual or group of individuals become available for others to use at zero or no extra costs and consumption by one person does not reduce the amount available for other users.

Examples of public goods include public roads, national defence, law and order, street lights, public clocks, public schools, public hospitals.

Characteristics of public goods

ü Non-exhaustibility. Consumption by one person does not reduce the amount available for other users.

ü Non-excludability. It is difficult to stop a person from consuming public goods or from getting the benefits of public goods.

ü Non-divisibility (Indivisible). They are equally available to all individuals in the society.

ü Usually provided by the state.

ü They are indirectly paid for i.e. through taxes.

ü No competition for them (There is non-rivalry in their consumption).

h)     Free/ natural/ original goods.

Are those which exist in natural abundance and are enough for everyone to consume as much as they want at zero cost. E.g. rain water, sunshine, moonlight, soil, air, etc.

Characteristics of free goods

ü They are provided by nature

ü They are in abundant supply.

ü They are consumed at zero cost.

ü They provide utility.

i)      Economic goods.

Are goods that are scarce and for one to consume them, a cost has to be incurred.

OR

Are goods that arise out of scarcity and choice.

Any commodity which is paid for is an economic good e.g. clothes, vehicles, pens.

Characteristics of economic goods

ü They are relatively scarce.

ü They provide satisfaction/ utility

ü They command a price/ be marketable/ have a monetary value.

ü They have opportunity cost.

ü Their ownership is transferable

j)      Merit goods.

Are those whose consumption is deemed intrinsically desirable and are meant to improve the quality of life of the people and their consumption should be encouraged. Examples of merit goods are safe water, health care and education.

k)     Demerit goods.

These are goods considered to be socially undesirable and reduce the quality of life of individuals and the society at large e.g. cigarettes, alcohol, pornographic materials.

l)      Normal goods.

These are goods whose demand increases as the consumer’s income increases. E.g. first hand cars, first hand shoes, first hand suits.

m)  Inferior goods.

Are those whose demand reduces as the income of the consumer increases e.g. cassava and beans, second hand clothes, second hand computers, second hand shoes.

OR

Are goods with negative income elasticity of demand.

n)    Giffen goods.

Are those whose demand increases with the price and take a big percentage of the budget/ income of the low income earner e.g. the basic foodstuffs.

OR

Are goods with positive price elasticity of demand consumed by low income earners.

OR

Are goods with positive elasticity of demand and negative income elasticity of demand consumed by low income earners.

Examples of Giffen goods are basic foodstuffs like bananas, maize flour, bread, bread, cassava, potatoes etc.

NB

All giffen goods are inferior but not all inferior goods are giffen.

o)     Superior goods/ articles of ostentation/ luxuries/ status symbols.

These are goods that are desirable only when they are expensive and people buy them show their class or to impress/ attract the attention of others for example golden earrings, sports cars, perfumes, golden watches, expensive phones, etc. The demand for superior goods increases as the price increases.

p)     Necessities/ essential goods.

These are goods that that a consumer cannot do without for example food, shelter, water, clothing, soap, fuel. The demand for necessities first increases when there is an increase in the consumers’ income up to a certain point beyond which further increase in income does not affect the quantity demanded. (Quantity demanded remains constant).

q)     Complementary goods.

These are goods where the quantity demanded of one commodity varies inversely as the price of the other commodity. (As the price of one commodity goes up, the demand for the other falls).

OR

Complementary goods are goods that are consumed together.

Examples include cars and fuel, guns and bullets, tooth brush and tooth paste, etc.

r)      Substitute goods.

These are goods where the quantity demanded of one commodity varies directly as the price of the other commodity. (As the price of one goes up, the demand for the other also rises).

OR

Substitute goods are goods which can be used for the same purpose.

OR

Substitute goods are goods which can be used interchangeably.

Examples include Colgate and fresh-up, tea and coffee, Omo and Nomi, etc.

SERVICES

These are intangible items that are helpful in making our lives comfortable and useful e.g. medical services, teaching services hair dressing services, banking services.

OR

These are intangible items used to facilitate the production of goods and services.

They can be classified as;

a)     Personal services.

These are provided by individuals directly e.g. pastors, doctors, services of a teacher, etc.

b)     Commercial services

These are services provided by institutions and are related to aids to trade e.g. insurance companies, communication networks, banking services, transport services, etc.

HUMAN WANTS/ NEEDS

These are desires of man which are satisfied by consuming goods and services.

They can also be defined as biological, physical and cultural needs of an individual or society.

They can be categorized as;

a)     Basic needs/ wants.

These are necessities of life without which life would hardly exist. E.g. shelter, food, water and clothes.

b)     Secondary needs.

These are needs that are required to make life comfortable. E.g. television sets, cars, air conditioners, etc.

c)     Material needs/ wants.

These are desires which are satisfied through consumption of tangible/ physical goods e.g. desire for clothes, food, houses, chair, phone, etc.

d)     Immaterial needs.

These are desires satisfied by consumption of services e.g. entertainment, security, health care, knowledge, etc.

e)     Private wants.

These are desires of individuals and are always satisfied using personal resources e.g. the desire for eye glasses, wheel chair by a lame person, phone, etc.

f)      Public wants/ needs.

These are collective needs of society which are satisfied by public goods and service e.g. the desire for public health centres, public schools, public roads, national defence, etc.

g)     Satiable wants.

These are wants which can be satisfied by the available resources at a given period of time e.g. one’s desire to quench thirst is satisfied by water for some hours.

h)     Insatiable wants.

These are wants which cannot be satisfied using the available resources in a short period of time. Such wants cannot be satisfied because of the limited resources e.g. the desire for money and knowledge.

FEATURES/ CHARACTERISTICS OF HUMAN WANTS

ü Human wants are unlimited i.e. they are endless e.g. man’s desire for education, security, leisure is unlimited.

ü They are dynamic, i.e. they keep changing from time to time depending on the prevailing social, political and economic conditions.

ü They are varied, i.e. they are many and of different types e.g. spiritual, biological, physical, etc.

ü They are competitive in nature, i.e. individuals always compete for the limited resources in order to satisfy the unlimited needs.

ü They are recurrent (insatiable) i.e. there is a continuous need to satisfy wants from time to time/ they are hardly satisfied once and for all/ it is impossible to satisfy human wants. E.g. one’s desire to quench thirst re-occurs.

ü They are complementary, i.e. they are jointly satisfied e.g. one’s desire for a car calls for other desires like buying fuel and car service.

 WEALTH

Is a stock of productive goods/ assets which satisfy private and social needs of people.

OR

Wealth is the stock of assets and other resources existing in an economy at a given time which are used to generate more income.

FEATURES/CHARACTERISTICS OF WEALTH

ü It is relatively scarce.

ü It creates utility/ provides satisfaction

ü It’s ownership is transferrable

ü It has a monetary value/ commands a price.

ü Can be used to produce more wealth.

      TYPES OF WEALTH

1.     Personal wealth.

These are assets that are owned by an individual and they are used to satisfy the individual owner, e.g. personal clothes, furniture, books, vehicle, house, land, cattle.

2.     Business wealth.

These are assets that are owned by a business firm with a view of making profits e.g. company vehicles, raw-materials, commercial buildings, industrial machines, generator and furniture.

3.     Social/ public/ collective wealth.

These are assets that are owned by the state/government and are collectively used by all members of the society, e.g. public roads, schools, hospitals, public springs/ wells, street lights.

ECONOMIC QUESTIONS

An economy or an individual is faced with a number of economic questions. These include;

a)     What to produce.

Since resources or factors of production are scarce, a choice of what is to be produced must be made. Some societies would prefer to have more food, clothing and medical care while others would prefer more schools, roads and other forms of infrastructures.

b)     When to produce.

That is choosing to produce now for present consumption or in the future. Most people prefer to consume now than postponing it for tomorrow. “A bird in hand is better than a thousand in the bush.” A situation in which present consumption is preferred to future consumption is termed as “positive rate of time preference” while a situation in which future consumption is preferred to present consumption is termed as “negative rate of time preference.”

c)     Where to produce.

This concerns the location of the business. That is whether to produce near the source of raw materials or near the market or anywhere without considering any pull factor. A low cost locality is where the industry is usually located.

d)     How to produce.

This concerns the method of production. That is whether to use capital intensive or labour intensive technology. In a country like Uganda where labour is abundant and cheaper than capital, more labour is used to produce goods and services. In contrast, developed countries have vast capital equipment and therefore use capital intensive methods at different production levels.

e)     For whom to produce.

This concerns the nature of the consumers who are to consume the products. That is whether to produce for the rich or the poor, male or female, young, adults or old people and so on.

f)      How much to produce.

This depends on the demand for the commodity and the objective of the firm. The more the demand for the commodity, the more quantities producers are likely to produce and put on the market. Also if the objective of the firm is to maximize sales, more is produced than when the firm’s objective is to maximize profits.