- An economic system produces and distributes goods and services by using natural, human and manufactured resources.
- An economic system consumes goods and services to satisfy people's needs and wants in the most efficient and effective way.
Resources
- May be known as capital
- Capital used as it is or to produce goods and services.
- There are three main types:
- Natural capital
- Human capital
- Manufactured capital
Natural capital and natural income
- Natural capital includes natural resources that have a value and those that support life.
- Trees, soil, water, living organisms, ores, etc.
- Flood and erosion protected by forests, etc.
- Natural capital can also be processes
- Photosynthesis
- Water and gas cycles
Natural capital in economic systems
- Capital yields income
- Natural capital yields natural income
- The World Bank now calculates wealth of countries by including the rate of extraction of natural resources and the ecological damage caused by this. Least developed countries might have a large amount of natural resources and natural capital, but these are exported to more developed countries for manufacture.
- Sustainability often represents sources of conflict within and between political parties and countries.
Natural income
- Yield or harvest of services
- Water cycle provides fresh water
- Photosynthesis provides oxygen
Resource categories
- Renewable: Can be replaced continuously as it is used by humans. For example, agriculture products.
- Non-renewable: Finite amounts of a resource, which are used as a short term solution. They might be replaced by other resource when depleted completely. For example, fossil fuels.
- Replenishable: Middle ground between renewable and nonrenewable, a resource that can be replaced but at slower rates than renewable resources. For example, groundwater.
- Recyclable: Resources that have been used and can be processed to be used again in another form. For example, paper glass and plastic.
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