1 Essential Question: Define the term scarcity and explain what it forces us to do, Identify the 3 basic economic questions, explain the difference between productivity and efficiency, Why should a producer pay attention to P+E? Scarcity and Choice SECTION 2

2 What is Scarcity? Scarcity is most basic problem in Economics. It is the combination of two important facts There is a limited supply of resources There is unlimited demand for these resources by the different societies of the world Since scarcity is a fact, it forces us to make choices about how we use resources Scarcity and Choice SECTION 2

3 Three Basic Economic Questions what to produce- this needs to be answered based on what resources you have - everyone’s need should be considered how to produce- are there ways to produce that use resources more efficiently? for whom to produce- who will get the finished product? Scarcity and Choice SECTION 2

Productivity vs. Efficiency Productivity is the measure of how much output you get (product) based on how much input you use (resource). If you add more resources (input) productivity (output) SHOULD increase Efficiency means getting the greatest amount of output using the least amount of input Scarcity and Choice SECTION 2

Henry Ford and the Assembly Line Scarcity and Choice SECTION 2

Why do producers study productivity/Efficiency? Producers have to PAY for the resources that they consume They do this to make products that they can sell Producers never want to spend more on resources than they will get in return when they sell their products Low Productivity = Lack of Efficiency = Waste!!! Scarcity and Choice SECTION 2