Distinguish between: (a) Economic resources and non-economic resources. (b) Want and Demand. (c) Money Cost and Real Cost.

Answer Details

(a) Economic resources versus non-economic resources

• Economic resources (free-of-nothing, i.e. scarce goods): resources that are scarce relative to demand, so they command a price and their use involves an opportunity cost, for example land, labour, capital and minerals.
• Non-economic (free) resources: resources so abundant that they satisfy all wants at zero price and carry no opportunity cost, for example air, sunshine and, in some places, sea water.

(b) Want versus demand

• Want: a mere desire or wish to have a good or service; it need not be backed by the ability or willingness to pay.
• Demand: a want backed by both the willingness and the ability to pay a price at a particular time. Demand is therefore effective (backed by money), whereas a want alone is not.

(c) Money cost versus real cost

• Money cost: the amount of money actually spent to produce or acquire a good, that is, the payments made for factors and materials expressed in money terms.
• Real cost: the effort, sacrifice and alternatives forgone in producing a good, that is, the opportunity cost measured in terms of the other goods or satisfactions given up rather than in money.