Economics: Incentives, Factors of Production, and Trade Principles

Incentives

Factors that motivate or influence behavior

Financial Incentives

Monetary rewards or penalties

Social Incentives

Recognition or peer pressure

Moral Incentives

Personal values or ethics

Consumer Behavior Influencers

Prices, quality, and personal preferences

Business Decision Drivers

Profit potential, market competition, and resource availability

Factors of Production

The four fundamental resources used to produce goods and services

Land and Natural Resources

All natural resources used in production

Economic Rent

Payment for use of land

Labor

Physical and mental effort of workers

Capital

Physical capital, financial capital, and technological capital

Entrepreneurship

Combines other factors of production, involves risk-taking and innovation

Circular Flow Model

Model showing the flow of money, goods, and services

Households in the Circular Flow

Provide factors of production and receive income

Businesses in the Circular Flow

Produce goods and services, pay for factors of production

Product Market Flow

Where goods and services are bought/sold

Factor Market Flow

Where resources are bought/sold

Trade

Exchange of goods and services

Benefits of Free Trade

Increased competition, lower consumer prices, greater product variety

Comparative Advantage

Ability to produce goods at a lower opportunity cost

Global Trade Patterns

Major trade routes, key trading partners, trade agreements

Impact of Technology on Trade

E-commerce, digital services, cryptocurrency, blockchain

Current Trade Challenges

Supply chain disruptions, trade wars, environmental concerns

Future of Economic Relations

Emerging trends like digital transformation and sustainable trade