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1 Introduction - ECONOMICS 2GO3/2XO3 Introduction Economic...

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4/2/2008 1 ECONOMICS 2GO3/2XO3 Introduction Economic activity transforms resources into goods and services (goods, for short). The resource endowment of an economy is all the resources (human and physical) available to an economy. A list of everything that can be used to produce goods. Resources are limited or scarce in supply – only a certain amount available for use in an economy. Economic activity transforms resources Technology determines how resources can be used to produce goods. It tells the different combinations of resources that can be used to produce a good. Firms choose the technology/technique that is least costly.
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4/2/2008 2 Individual preferences tell firms what goods people would like to buy. Institutions provide rules followed by all agents in the economy. Examples include competition laws, leaving deposits on rented goods, etc. They regulate economic activity.
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