Scarcity: The Fundamental Economic Issue Chapter 1 Mrs. Davidovich

BELLRINGER TINSTAAFL Why is the following statement correct? “There Is No Such Thing As A Free Lunch”

SCARCITY The condition that arises because society does not have enough resources to produce all the things people would like to have. – what resources go into production? – The Big 4: land labor capital entrepreneurship

The 3 Basic Questions Since resources are scarce, society must try and provide for the needs of its people as best as possible and do so by answering 3 basic economic questions. 1.WHAT TO PRODUCE? 2.HOW TO PRODUCE? 3.FOR WHOM TO PRODUCE?

The questions are not easily answered and different societies answer the questions in varying ways. How the questions are answered and how we as humans attempt to satisfy our wants and needs through consuming scarce resources is…ECONOMICS. Economics studies the behavior of people as they cope with the fundamental problem of scarcity.

CHOICES The process of making choices is NOT easy. You cannot have EVERYTHING you want, therefore…. Trade-offs – alternative choices – are made when spending time and income There is a cost incurred when making trade- offs. An opportunity cost – is the cost of the next best alternative use of money, time, or resources when one choice is made rather than another.

Production Possibilities Frontier the visual representation of opportunity costs used by economists The most classic economic example is “Guns and Butter” – domestic v. global investments made by the gov’t.