Economizing Problem “Scarcity”

Scarcity - When There Is Not Enough For Everyone – Someone Suffers

The Economizing Problem is that; SOCIETY HAS VIRTUALLY UNLIMITED WANTS... BUT LIMITED OR SCARCE RESOURCES!

The economizing problem is one of deciding how to make the best use of limited resources to satisfy virtually unlimited wants.

Require resources to produce. So we call these resources the factors of production. Food Clothing Shelter All goods and services

. Land natural resourcesNature’s items. 1. Land [natural resources] – Nature’s items. In the earth A. In the earth - coal, oil, water, fossil fuels On the earth B. On the earth – vegetation and water In the atmosphere C. In the atmosphere – sun, wind, and rain The Four Factors of Production starting point Land is the starting point of all production.” “Stuff” “Stuff” from which everything is made. WaterWind Sun Fossil fuels

2. Labor [human resources]- the “brain-power” and “muscle-power” of human beings. A. Physical – pro basketball players & lumberjacks B. Intellectual – ministers, doctors & lawyers Labor is the most important resource accounting for in the U.S. 70% of input cost in the U.S.

“Financial Capital” “Financial Capital” = money, stocks, bonds. These are not economic resources because they produce nothing. 3. Capital Resources – all “man-made inputs” used to produce consumer products (machinery, physical plants, & tools). A. Capital goods – goods [machinery, buildings, & tools] used to produce other goods. [crane, Ford plant, hammer] Capital goods represent future wealth, or economic growth. B. Consumer goods – products meant for “immediate consumption”. Consumer goods represent current wealth or standard of living. A product can be a both a consumer & a capital good, depending on its use (using your personal car to delivers pizzas.)

4. Entrepreneurship – the drive to introduce a new product or start the new business. Entrepreneurs combine land, labor, & capital to produce products. They are the “Sparkplugs” of economic growth. Their job is to innovate.

These resources are not free. They require payment to use. RENTAL INCOME INTEREST INCOME WAGES PROFIT & LOSS LAND CAPITAL HUMAN RESOURCES LABOR ENTREPRENEUR Property Resources

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