Chapter Essential Question How can we make the best economic choices?

Describe the difference between needs and wants 1. Objectives Describe the difference between needs and wants Explain what is utility and scarcity. Describe what entrepreneurs do. Define the three factors of production and the differences between physical and human capital. Explain how scarcity affects the factors of production.

Utility is the economic term for satisfaction/happiness/well-being 2. What is Economics Utility and Needs / Wants Needs and wants are what we desire that gives us satisfaction/happiness/well-being Utility is the economic term for satisfaction/happiness/well-being Goods and services are things that satisfy our needs and wants and give us utility Goods and Services Needs/Wants Utility Satisfy Gives Us

Utility is a key concept in economics 2. What is Economics Utility and Needs / Wants Utility is a key concept in economics All consumers (households, people) want to MAXIMIZE utility. We get utility through consumption and leisure Consumption is buying goods and services We have unlimited needs/wants Scarcity of resources prevents us from unlimited utility. We call this a constraint

How does scarcity force people to make economic choices? 2. What is Economics Scarcity and Choice How does scarcity force people to make economic choices? scarcity means that there are limited goods and services for unlimited wants. People need to make choices in order to satisfy the wants that are most important to them.

Definition of Economics: 2. What is Economics Scarcity and Choice Definition of Economics: the study of how people make choices to use scarce resources to distribute goods/services to satisfy needs/wants

3. Entrepreneurs are the groups of people that start businesses First, they identify a need or want Then, they get the resources together Finally, they produce the good/service

3. Entrepreneurs Entrepreneurs play a key role in turning scarce resources into goods and services. Entrepreneurs are willing to take risks in order to make a profit. They: Develop original ideas Start businesses Create new industries Fuel economic growth Some famous entrepreneurs: Bill Gates, Steve Jobs, Russell Simmons, Sean Combs, Mark Zuckerberg Anyone who starts a business, including local stores on our blocks, is an entrepreneur!

An entrepreneur’s first task is to assemble the factors of production: land, labor, and capital. 4. Factors of Production:

These resources include: Fertile land for farming Oil Coal 4. Factors of Production: Land Land refers to all natural resources used to produce goods and services. These resources include: Fertile land for farming Oil Coal Metals/Minerals Water Forests Fish/Livestock

Labor is the work people do for pay/wages. Labor includes: 4. Factors of Production: Labor Labor is the work people do for pay/wages. Labor includes: The medical care provided by a doctor The classroom instruction provided by a teacher The tightening of a bolt by an assembly-line worker The creation of a painting by an artist The repair of a television by a technician Most skilled labor is in service-oriented jobs, which is why EDUCATION IS KEY

Physical capital includes: Buildings 4. Factors of Production: Capital Capital refers to any human-made resource that is used to produce other goods and services. An economy requires both physical and human capital to produce goods and services. Physical capital includes: Buildings Equipment (including Tech – computers, etc.) Tools Human capital includes: A college education Training – technology or job-specific skills Job experience

The benefits of capital include: Increased efficiency 4. Benefits of Capital Capital is a key factor of production because people and companies can use it to save a great deal of time and money. The benefits of capital include: Increased efficiency Increased knowledge Better time management Increased productivity The difference of capital in countries – both physical and human – is a key factor why there are developed (rich) and developing (poor) countries

Describe the difference between needs and wants Explain what is utility and scarcity. Describe what entrepreneurs do. Define the three factors of production and the differences between physical and human capital. Explain how scarcity affects the factors of production. Needs are essential. Wants are things we would like, but not required Utility is our satisfaction. Scarce resources means utility is constrained Organize businesses to satisfy needs/wants by assembling scarce resources and make goods and services Land, Labor, Capital; Physical – Man-made; Human – Knowledge Limited factors of production means entrepreneurs make tough choices over which resources to use

need: something essential for survival want: something that people desire but that is not necessary for survival goods: the physical objects that someone produces services: the actions or activities that one person performs for another scarcity: the principle that limited amounts of goods and services available to meet unlimited wants economics: the study of how people make choices to use scarce resources to distribute goods/services to satisfy needs/wants utility: the total satisfaction gained from getting needs and wants consumption: use of goods and services to generate utility leisure: generates utility through time to enjoy life

entrepreneur: a person who decides how to combine resources to create goods and services factors of production: the resources that are used to make goods and services land: all natural resources used to produce goods and services labor: the effort people devote to tasks for which they are paid capital: any human-made resource that is used to produce other goods and services physical capital: the human-made objects used to create other goods and services human capital: the knowledge and skills a worker gains through education and experience