Scarcity and the Factors of Production Chapter 1: Section 1

Scarcity and Choice Need- Air, Food, Shelter. Want-An item we desire but not necessary for survival. Economics is the study of how people seek to satisfy their needs and wants by making choices. Scarcity and Choice

Scarcity Goods are physical objects such as shoes and shirts. Services are actions or activities that people perform for one another. Scarcity implies limited quantities of resources to meet unlimited wants. Scarcity

A shortage occurs when producers will not or cannot offer goods or services at the current prices. Holiday season Wars Scarcity always exists. Why? Scarcity vs Shortage

Factors of Production Land Labor Capital Entrepreneurs Physical Capital Human Capital Entrepreneurs Factors of Production

The factors of production are all the resources used to make goods and services.

Land All natural resources used to produce goods and services. Fertile land, coal, oil, water, forests Land

The effort that a person devotes to a task for which that person is paid. Medical aid, Assembly line, paintings, repairs Labor

Capital is any human-made resource that is used to produce other goods and services. Physical Capital v. Human Capital Capital

Human made objects used to create other goods and services. Buildings and tools Physical capital is needed for Extra time, more knowledge, more productivity. Physical Capital

The knowledge and skills a worker gains through education and experience. Doctors and stethoscopes Teachers and computers Human Capital

Ambitious leaders who decide how to combine land, labor and capital resources to create new goods and services. Individual who take risks to start a business and create new industries. Entrepreneur

THE ECONOMIC WAY OF THINKING Micro and Macro Views of the World Microeconomics: The study of the choices that individuals and businesses make and the way these choices interact and are influenced by governments. Macroeconomics: The study of the aggregate (or total) effects on the national economy and the global economy of the choices that individuals, businesses, and governments make. THE ECONOMIC WAY OF THINKING