Fundamental Economic Concepts 1) explain the nature of scarcity and show its relationship to economics; 2) describe the factors of production; 3) examine the 3 basic economic questions each society must decide; 4) define economics and identify the 4 key elements within its scope.

Economics The study of human efforts to deal with their wants and needs and the scarcity of resources.

Scarcity The condition that arises because society does not have enough resources to produce all the things people would like to have.

Factors of Production “gifts of nature” Everything from forests to climates.

Capital goods Tools, equipment, and factories used in producing goods and services.

Financial Capital Money used to buy tools and equipment for production.

Labor People with their efforts, abilities and skills.

Entrepreneurs A risk-taker in search of profits.

3 Basic Questions: 1) What to produce 2) How to produce 3) FOR WHOM to produce

Key Elements of Economics 1) Description of economic activity; 2) Analyzing economic activity; 3) Explaining economic activity: 4) Predicting economic activity.

Trade-Offs Alternative choices

Opportunity costs The cost of the next best alternative use of money, time or resources.