Scarcity & Factors of Production Chapter 6

Why do we care about the economy? You live in a DEMOCRACY Eventually, you will get the opportunity to tell the gov’t how you think things should be done through VOTING and ACTIVE CITIZENSHIP If you don’t know what is going on, or do not understand it, you won’t know what is best to help your QUALITY OF LIFE. You can make Canada the best place to be!

You are a consumer What is available to you to buy is based on how Canada’s economy allocates resources.

Economy Defined CAN BE DESCRIBED AS: The resources and processes involved in the production, distribution, and consumption of goods and services.

Textbook pg. 199-201

Because WANTS are UNLIMITED and RESOURCES are LIMITED! Just like the girl in the comic, This family has an ECONOMIC PROBLEM! WHY? I need new pom-poms! I want a new snowboard! Don’t these kids know that money doesn’t grow on trees?! Meet the Normal Family: Because WANTS are UNLIMITED and RESOURCES are LIMITED!

SCARCITY ALL SOCIETIES FACE THE SAME ECONOMIC PROBLEM: UNLIMITED WANTS LIMITED RESOURCES THERE ARE NEVER ENOUGH RESOURCES IN A SOCIETY TO SATISFY ALL THE PEOPLE’S WANTS, THEREFORE A SCARCITY OF RESOURCES ALWAYS EXISTS

HOW SOCIETIES DEAL WITH SCARCITY Societies and the people in them must make CHOICES about the limited resources available to them and decide how to ALLOCATE the resources to meet the wants. THE ALLOCATION OF SCARCE RESOURCES (SCARCITY) IS THE BASIC ECONOMIC PROBLEM FACED BY ALL SOCIETIES

THE FOUR BASIC ECONOMIC QUESTIONS ALL SOCIETIES MUST CONSIDER 1.WHAT goods and services to produce 2. HOW goods and services will be produced 3. FOR WHOM goods and services will be produced HOW MUCH is to be produced and HOW FAST Unlimited WANTS THEREFORE, SOCIETIES MUST MAKE CHOICES: SCARCITY Limited RESOURCES

What limits supply? The FACTORS OF PRODUCTION (FOP)!! Land, Labour, Capital They are combined to produce GOODS and SERVICES You need all three in order to produce goods and services NATURAL RESOURCES = LAND HUMAN RESOURCES = LABOUR CAPITAL RESOURCES = CAPITAL

Land All natural resources and raw materials used in the creation of products. Includes renewable and non-renewable resources. What impacts might this decision about using the land have on the land?

Labour HUMAN RESOURCES: people and their skills and knowledge (physical and mental effort)

Capital CAPITAL RESOURCES: money or anything that can be used as collateral to get money (property, rare metals, etc.) Goods used to make more goods and services are also Capital Resources (Factories, tools etc)

Example In a landscaping business, the factors of production could be broken down as follows: Land: The grass, mulch, dirt, and flowers used. The wood and metal used to make the tools. Labor: The landscaper (equipped with specialized knowledge about the trade). Capital: The shovels, rakes, mowers, and trucks as well as the wages to pay labor.

Combined! CAPITAL LABOUR LAND ALSO CALLED “HUMAN RESOURCES” EFFORTS PEOPLE MAKE TO PRODUCE GOODS ALL MONEY USED TO PURCHASE, MAINTAIN MACHINES, FACTORIES, COMMUNICATIONS ETC, AND EQUIPMENT ALSO CALLED “NATURAL RESOURCES” SOIL, WATER, MINERALS ETC.

To Review: LAND + LABOUR + CAPITAL = FOP A LIMITED SUPPLY of any RESOURCE (or FOP) is called SCARCITY.   EVERY society deals with SCARCITY. The way a society deals with scarcity defines its ECONOMIC SYSTEM. Other words for SCARCITY? Shortage Deficit Shortfall Decreased Amount Rare Few Limited Not Enough Stuff!

Activities One Complete the FOP handout Two TV show: Recess from the Disney Channel