Tuesday, 18 November 2008

EPA notes- unit 1, 2 (2nd edition)

The structure in Hong Kong economy Economy includes the production firms(supply), exchange(trade; buy and sell) and consumption. There are three types of production: primary production, secondary production and tertiary production. 1) Primary production means that the production that getting resources from nature and output raw materials. For example, mining is getting coal or metals from nature. 2) Secondary production changes from raw material(s) to finished product or semi-finished product. Semi-finished product will further be in more process under tertiary production. For example, the production of paper from wood is a kind of secondary production. 3) Tertiary production is the process from semi-finished product to finished product. For example, teaching by using book, etc. is a kind of tertiary production. 4) The rising of production cost (rental cost, salary and prices of raw materials, etc.) leading to the declining of secondary production and not enough natural resources for primary production so that tertiary production is important in Hong Kong. People worked in secondary production are changing to tertiary production. Primary production requires hard work but unstable income. They are willing to sell their land and uses the money to change the living style. 5) Inter-relationship between the three types of production: Tertiary production provides services to both primary and secondary production; secondary production provides tool (fertilizer and machine) to primary production and semi-finished product to tertiary production; primary production provides raw material to both secondary (wheat) and tertiary production (oil). The main feature of Hong Kong economy The main features are private property rights and free market economic system. 1) Private property rights refer to the right to use, right to transfer (sell) and right to derive income. 2) The advantage of those rights is that people will best use their resources to earn money, thus stimulate people’s incentive to work and business people’s incentive to invest and promote economic development. 3) In order to maintain those rights, the government set laws to protect them and the government even can’t confiscate people’s property at will, compensation is needed. if the confiscation is legal according to the law. 4) The free market economic system refers to the price mechanism-people take part in buying and selling based on private property rights. 5) They can freely negotiate prices. 6) The system was set by market but not the government and it’s based on the well define of private property rights. 7) Prices and quantities of a commodity adjust automatically according to the market supply and demand.8) Hong Kong is one of the freest economies in the world and people can freely engage in buying, selling, investment as well as choosing their jobs.

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