Management Lecture 02 –
Economics – The study of how businesses, people make choices about:
What things to produce/consume
How best to produce things
How best to distribute wealth
Factors of Production:
1. Labour – human beings (ex: workers)
2. Natural Resources – raw materials found in ground, grown from earth, or
harvested from nature (Ex: Coal, Wheat, Water, Wood)
3. Capital – money, machines/tech that money can buy (Ex: Money, Computers,
4. Entrepreneurs – Ppl who assemble and organize the other factors of
production, the individuals who make it all happen
5. Information Resources – Info such as market forecasts, economic data, and
specialized knowledge of employees that is sueful to a business and that
helps it achieve its goals.
Q: What’s diff between entrepreneurship and labour? Isn’t entrepreneurship just
another form of labour?
Ans: Perhaps it isn’t the entrepreneurs itself that are the 4th factor but in fact a
culture of entrepreneurship
Economic Systems – A country; How these different countries answer the basic
economic Qs: (How to organize factors of production)
Who should own/control the factors of production?
What should be produced with the factors of production?
1. Command (Planned) Economies –
Gov owns/controls factors of production
Gov makes decisions
Ex: Former Soviet Union, Cuba, North Korea
2. Market Economies –
Individuals own/control factors of production
Individuals make all/most of the decisions
Market – Not a physical place; but a bunch of activities. Where exchanges take place
between buyers and sellers.