Scarcity: The Basic Economic Problem

What Is Scarcity? List of things that we want: List of things we can’t do without? Wants are desires that can be satisfied by consuming a good or a service. Needs are things that are necessary for survival.

People always want more, no matter how much they have already have. Wants are unlimited, but the resources available to satisfy them are limited. Scarcity exists when there are not enough resources to satisfy human wants.

Economics Economics is the study of how individuals and societies satisfy their unlimited wants with limited resources.

Basic Economics Vocabulary Goods are objects, such as food, clothing, and furniture, that can be bought. Services are work that one person does for another. A consumer is a person who buys or uses goods or services. A producer is a maker of goods or a provider of services.

Three Basic Economic Questions What will be produced? A society must decide the mix of goods and services it will provide How will it be produced? Capital-intensive approach v. labor-intensive approach For whom will it be produced? How goods and services are distributed among people in society.

Factors of Production The factors of production are the resources needed to produce goods and services.

Land All of the natural resources found on or under the ground that are used to produce goods and services are considered land.

Labor All the human time, effort, and talent that go into the production of goods and services are considered labor.

Capital All the physical resources used by people to produce and distribute goods and services are considered capital. So, too, are the knowledge and skills that make workers more productive.

Entrepreneurship The combination of vision, skill, ingenuity, and willingness to take risks that is needed to create and run new businesses is called entrepreneurship.