Scarcity and the Factors of Production Economics Scarcity and the Factors of Production 1

Study of Economics Economics is the study of how people seek to satisfy their needs and wants by making choices. Why? 5

Scarcity Scarcity refers to the fact that there is a limited quantity of almost all things that people want Scarcity is at the heart of economics – if there were no scarcity, there would be no need for economics Sooner or later a limit is reached 7

Scarcity Goods are any physical items or objects that are desired by people – most goods are available in scarce quantities Services are actions or activities that a person performs for someone else 7

Scarcity vs. Shortage A shortage occurs when producers cannot offer goods or services at the current prices Shortages can be temporary or long-term Droughts, wars or worker strikes can produce shortages 7

Factors of Production Land - Natural Resources Labor - Skills of People Capital - Goods Used To Make Other goods, but not money Physical: Buildings or tools Human: Knowledge or skills 10

Who makes Resources into Goods? Entrepreneurs: a leader who combines land, labor and capital into marketable goods and services They take risks to develop ideas, start businesses and create industries for the main reason of profit Bill Gates