Chapter 1.1 notes

Scarcity and the Science of Economics Fundamental Economic problem: scarcity – unlimited wants, limited resources Economics – the study of how people try to satisfy unlimited wants through the careful use of relatively scarce resources.

must distinguish between needs and wants everything comes at a price, even if it’s “free” 3 Basic questions: What to produce? How to produce? For whom to produce?

4 Factors of Production Land – “gifts of nature” not created by humans Capital – tools, equipment, machinery and factories used in the production of goods and services. Financial capital - $ used to buy tools and equipment. Labor- people and their efforts, abilities and skills; everyone except entrepreneurs

Cont’d Entrepreneurs- risk takers in search of profits who does something new w/ existing resources; they are the driving force of economy by combining land, labor and capital into new products Production- must have all factors present to create goods and services.

Chapter 1.1 questions What is the basic economic problem facing all societies? How is a need different than a want? What does TINSTAAFL stand for, and what does it mean? What are the 3 basic questions societies must answer about using resources? List the factors of production and define them What is production?