Scarcity and the Science of Chapter 1 Lesson 1 Scarcity & the science of Economics Chapter 1 Lesson 1 Scarcity and the Science of Economics

Explain the fundamental economic problem. Objectives: Explain the fundamental economic problem. 2. Examine the three basic economic questions that every society must answer. List and use examples of the factors of production. 4. Explain the paradox of value. 5. List & use examples for the different types of goods.

Economics: study of how people try to satisfy unlimited wants with limited resources. **#1 rule of economics: TINSTAAFL There Is No Such Thing As A Free Lunch

**Major Econ. Problem: SCARCITY --occurs when people do not have enough resources to produce all of their needs & wants --does not occur because of lack of $ --ie=heart transplant

**4 Factors of Production 1. land Must be natural & limited

2. capital Must be used for production

3. labor The work force (human capital)

4. Entrepreneurs Risk takers in search of a new business

Phil Knight Nike Mark Cuban Broadcast.com Pierre Omidyar Ebay Evan Spiegel & Bobby Murphy Snapchat Mark Zuckerburg Facebook Warren Buffett--Berkshire Hathaway Sean Combs Bad Boy Records

4 types of Goods: Economic Products: goods & services that are useful, relatively scarce & transferable 4 types of Goods: Consumer 2. Capital 3. Durable (> 3 years) 4. Nondurable (< 3 years) Service: work performed for someone else

**The Three Basic Questions: What to produce? 2. How to produce it? For whom is the product being produced?

Product Partner Project! Improve or come up with a new product! Name it Draw the new product--at least half of paper and in color Answer the three questions what–be very descriptive and include the type of good it is(capital, consumer, durable or non-durable) how—how is the product going to be made (factory, by hand, by you, by hired workers) for whom—who is your target consumer

Product Partner Project! Improve or come up with a new product! 4. List and label the four factors of production (this should be the longest part of the project— be detailed! List your names as the Entrepreneurs) 5. What price would you sell it? **product must be school appropriate!

Economic Products must have: 1. Value: worth expressed in dollars & cents **Paradox of Value: some necessities have little value whereas some non-necessities have higher value --think of it as the “diamond- water” paradox --Why? Scarcity!

2. Utility: capacity to be useful & provide satisfaction --differs from one person to the next

Wealth: accumulation of those products that are tangible, scarce, useful and transferable --service is not included in wealth (talent cannot be transferred)