Scarcity and the Factors of Production

Objectives  Identify the economic roles in society.  Identify land, labor, and capital as the three factors of production (resources), and identify the two types of capital.  Explain why scarcity and choice are basic problems of economics.  Explain how to deal with scarcity.  Identify the four economic questions that nations ask.

The Economic Roles (and their examples)  The Consumer: That’s you!  Consumer Goods: The things you want for Christmas (physical objects).  Services: Professional greeters (activities)  The Producer: They make what you buy.  The Entrepreneur: A person who assembles the factors of production to create new goods and services.

The Factors of Production  “The resources that are used to make all goods and services.”  Three Types of Resources:  Human (Labor)  Capital  Natural (Land)

Types of Resources Human Resources (Labor):  The people needed to create a consumer good or service  Physical or Mental  Examples:  McDonald’s?  Wal-Mart?  LHHS?

Types of Resources (Cont’d) Capital Resources:  Any resource that is used to produce other goods and services (two types):  Physical Capital: Human-made objects used to create other goods and services  Human Capital: Education and knowledge  Examples:  Doctor?  Nike?  In-n-Out?

Types of Resources (Cont’d)  Natural Resources:  All materials found in nature to produce the good or service Types of Resources

Scarcity  What is scarcity?  Needs vs. Wants  Scarcity vs. Shortage  Why is scarcity important?

The Causes of Scarcity  Poor distribution of resources  May depend on personal perspective  Rapid increase in demand Examples: $3 million for The First Tee $460,752 for hops research $211,509 for olive fruit fly research in Paris, France $196,000 for the renovation of the historic Post Office in Las Vegas $188,000 for the Lobster Institute in Maine $148,950 for the Montana Sheep Institute

How to Deal with Scarcity  Just do without something  Create more resources  Produce more by making better use of existing resources  Redistribute and share

The Four Economic Questions Nations Ask  What goods and services will be produced?  “Let’s invent and sell disposable underwear.”  How will the goods and services be produced?  “We’ll hire paper-mache experts to design and make our clothes.”  Who will get them?  “Let’s sell this stuff to lazy people who don’t like to wash their underwear.”  How much will be produced for now and how much for later?  “Our company will produce 5,000 disposable underwear outfits that present three types of styles.”