ECONOMICS RESOURCES, ACTIVITIES, AND UNITS

By: SENATHON IPIA






Definition of Resources
Resources are goods and services and all the factors used to produce goods and services.

* There is economic resources and there is non-economic resources.


Economic Resources
Economic resources are the goods and services which are limited in supply or scarce in supply and so
command a price.

OR

Economic resources are the goods and services that command a price.



Non-economic Resources
Non-economic resources are resources that are abundant in nature (unlimited in supply), free and so
command no price.   They include air, sea, water, etc. But when non-economic resources become scarce, then they become economic resources.    For example, when in the ocean, water is abundant and free, and a non-economic resource.

But where there is no body of water (land), water is an economic resource, because there, it is
scarce, so it commands a price.



Classification of Economic Resources
Economic resources are classified into the following:
1. natural resources                 

2. human resources                

3. man-made resources

*In the production of goods & services, resources are also called inputs.


1. Natural Resources
These are free gifts of nature, such as fish in the river, animals and trees in the forest; liquid minerals,
such as crude oil; solid minerals, such as gold, silver, diamond, copper, coal, etc.

Note: In the classification of factor of production natural resources are generally classified as land.


2. Human Resources
Human resources refer to skills, knowledge, capacity, competencies that individuals have and use to
produce goods and services.

Taking about factors of production, human resources are therefore labour and entrepreneur.
Another name for human resources is human capital.

That is, human capital refers to skills, knowledge, capacity, competencies that individuals have and
use to produce goods and services. Human capital is therefore labour and entrepreneur.


Ways of Improving Human Capital
- Improve the level or standard of education.
- Increase practical experience and training.
- Provide better training facilities to train people.

3. Man-Made Resources
Man-made resources are called goods. They are classified into consumer goods and   capital goods.
Consumer goods are goods whose benefits are used up immediately by the consumer or goods
that are NOT used to produce other goods.

Capital goods are technology used for production of other goods and services.  This includes equipment, plant, machinery, etc. Another name for capital goods is physical capital.

That is, physical capital is technology used for production of other goods and services, and its includes equipment, plant, machinery, etc. (as mentioned above)


Economic Activities
Economic activities refers to all the activities involved in carrying out investment, production,
distribution, exchange and consumption of goods and services


Classification of Economic Activities
If you carry out an economic activity, then it may fall into one of these categories:

1. Investment:    Investment is spending money on goods and services to generate more money.
(Or simply put, investment is spending money to get more money).

2. Production:    Production is the creation of goods and services that satisfy human wants.

3. Distribution: Distribution is the processes in moving goods and services to the consumer. It requires the wholesaler and retailer as intermediaries.

4. Exchange:  Exchange is giving goods or services up to receive money. Exchange includes trade in
goods & services. It therefore involves the buyer and seller.

Note: (i)    If NO price is paid for good or service rendered; then it is NOT an economic good or service, or economic activity. Provision of goods or services or both in exchange for money is economic activity

(ii). If an activity does NOT command a price, then it was NOT an economic activity.

Examples of activities that are NOT economic activities are:
- attending a town’s meeting – if there was NO payment made.
- a visit to the stadium without paying a ticket
- arresting a petty thief, and there was NO payment.

5. Consumption:  Consumption refers to making use of goods and services to satisfy human wants.


Note: A consumer is whoever makes use of goods or services or both, whether as an individual, a
business organization or a government.


Economic Units (or Sectors)
The entire economy of a country is divided into four different economic units or sectors, namely:

1. Household sector               

2. Business sector
3. Government sector             

4. Foreign sector

-Household unit or sector refers to individuals.

- Business unit or sector refers to business organizations (also known as firms).

- Government sector is also known as public sector.

- Foreign sector is imports and exports.


For more, send e-mail to: senaipia@gmail.com, or  call: +2347052802574

Senathon Ipia is a Chartered Accountant with the Institute of Chartered Accountants of Nigeria (ICAN).