Unit 3, Economics

 Economics is the study of how people, choose to use scarce resources to satisfy their unlimited wants.

(1) People’s wants are unlimited (2) The resources needed to meet these wants ARE limited.

Scarcity Condition that results from unlimited wants and limited resources Scarcity exists because every society has limited resources

Land

 The resources of land, labor, capital, and entrepreneurship are used to produce goods and services

 Things found in nature

 Any good that is used to produce other goods and services

 People using their skills to do mental and physical work

 A risk taker who opens their own business in seek of a profit

1. Doctor 2. Hammer 3. Gold 4. Money 5. Bulldozer 6. Diamonds 7. Bill Gates 8. Farmer

but since …. Resources are LIMITED choices must be made and opportunity costs occur

 0dXAGAE 0dXAGAE

 The value of what is given up when a choice is made. OR

 If you have $10, and you go to the local restaurant, you decide that you want the taco meal. If you did not get that, you would get the hamburger meal. If that is not available, then you’d rather keep your money. What is the opportunity cost (the next best alternative that is given up)?  A. $10  B. The hamburger meal  C. $10 and the hamburger meal  D. The taco meal

 B. The hamburger meal  If you did not get the taco, you would have gotten the hamburger. Therefore, the hamburger was given up.  You could not have the hamburger AND $10, so you did not give up both.

Three Basic Questions (write these at the bottom of the ‘opportunity cost’ page) 1. WHAT goods and services will be produced? 2. HOW will the goods and services will be produced? 3. TO WHOM will the goods and services be distributed?

 What are the four factors of production?  What is opportunity cost, and how does it relate to scarcity?  What is economics about?