Scarcity and the Factors of Production

Scarcity: Basic Economic Problem Lack of enough resources to satisfy our wants Affects every person, business, government and society. Human wants > Limited resource = SCARCITY

V. V.

Wants Are Unlimited: Scarcity exists b/c people’s wants are never satisfied Economic Good: any item that is scarce Economic Bad: an item we would pay to have less of to “make scarce”

Resources are Limited: Resources = FACTORS OF PRODUCTION LAND: All “natural” resources Water, forests, wildfire, minerals, gas, and oil. Owners of land receive RENT

1. LAND

2. LABOR Includes all the time, effort, and talent that goes into production Physical/Intellectual service: training, education, and abilities of people in society. People who provide LABOR are paid a WAGE.

2. LABOR

3. CAPITAL All resources made/used by people to help produce and distribute goods and services. Machinery and Equipment (used in production) Owners of Capital receive: INTEREST

3. CAPTIAL

4. ENTREPRENEURSHIP Rare Combo: Vision, ingenuity, energy, and willingness to take risks needed to run a new business. RISKTAKERS: Time, money, energy in hopes of profits (from satisfying consumer wants)

4. ENTREPRENEURSHIP Fred DeLuca -Borrowed $1,000 from friend (partner Peter Buck) to start sub-shop to pay for college