Scarcity Chapter 1

The Fundamental Economic Problem: Scarcity Scarcity is the condition that results from a society not having enough resources to produce the things people would like to have. How big of a deal is scarcity? Put it this way, just about every war ever fought can historically be tied to scarcity. In other words because Nation A did not have enough resources to produce things its people wanted, it tried to take them from resource-rich Nation B.

Scarcity is caused by the fact that there are unlimited wants, but there are not limited resources.  As a result, societies are forced to make choices: What will they make, how will it be produced, and for whom will it be produced?

Economics: A Problem of Scarcity Problems of Scarcity Unlimited Wants and Needs Limited Resources Three Economic Questions What to produce? How to produce? For whom to produce? Free Enterprise Centrally Planned Mixed

Economics What is it? Is the study of how people try to satisfy seemingly unlimited and competing wants through the careful use of relatively scarce resources. Social Science – because it deals with the behavior of people as they deal with this basic issue (scarcity). Economics deals with 4 key elements: 1. Description 2. Analysis 3. Explanation and 4. Prediction

Description GDP – Gross Domestic Product. This isn’t something that is gross, like a booger factory. It’s the gross (as in total) dollar value of all final goods and services within a country’s borders in a 12 month period. (ours is in the neighborhood of $13 Trillion. It’s a comprehensive measure of a country’s total output, and a key measure of a nation’s economic health.

Analysis Economics analyzes the economic activities it describes I.E. – why are the prices of some items higher than others? Why do some people earn higher incomes than others? How do taxes affect people’s desire to work and save?

Explanation After a problem has been analyzed it needs to explain or communicate this knowledge to others.

Prediction Economics is the study of what is happening and what tends to happen. Most likely effect of different actions Economics can help us become more informed citizens

NEEDS / WANTS A need is a basic requirement for survival (food, clothing & shelter) A want is something we would like to have, but is not necessary for survival.

NEEDS VS. WANTS http://www.youtube.com/watch?v=QuB3kr3ckYE (needs) Vs. http://www.youtube.com/watch?v=QuB3kr3ckYE   (needs) Vs. https://vimeo.com/90127834 (wants)

Man Vs. Wild Think travel shows: Bear Grylls and Survivorman is to needs as the TACO commercial on SNL is to wants. In this case food can be both a want and a need. Bear Grylls would want to eat a steak, but given the scarcity of steak on the desert/deserted island/mountain top/etc. he will need to eat whatever can sustain him.

TINSTAAFL There is no such thing as a free lunch. As the saying goes, if it’s too good to be true, it is. The cost will get covered somewhere, sometime, eventually.

WHAT, HOW and FOR WHOM Never easy questions to answer, but always dictated by scarcity. What to produce? A society cannot have everything so it must decide. How to produce it? Workers vs. Automation For Whom? Who will receive the existing supply?

Factors of Production

FACTORS OF PRODUCTION: Resources required to produce the things we would like to have: Land: Anything from actual land to the basic “gifts of nature”. This could be mineral deposits (like gold lodes or oil fields), livestock, farmland, water, forests, sunshine, and the climate needed to grow the crops. Because none of this is infinite, there is a limited supply. And where there are limits, there is scarcity.

Capital and Goods Capital: Also known as capital goods, these re the tools, equipment, machinery, and factories used to make the product and or service. These can be both products and capital. Here’s an example: Dell produces computers – they are products made for purchase and profit. However, those computers, when used here at school are also CAPITAL. They are used to help produce lesson plans, student papers, grades, the school paper and yearbook, and other educational related products.

Labor LABOR: Third factor of production. These are the people who make the products, with all their efforts, abilities and skills. What determines the quantity and quality of labor?  

Entrepreneur Entrepreneurs: These are the people who are the risk-takers in search of profits who does something new. These people are the driving force in the economy, because they are the people who start new businesses or bring new markets to product. Kevin A. Plank spent $460 to have seven synthetic shirts sewn AND thousands of dollars more having many more shirts made as well. There was no guarantee that anyone would by his new T’s. He was willing to take risks. UNDER ARMOUR EXAMPLE ON PAGE 11