Scarcity and the factors of production Economics starts with idea that People cannot have everything they need or want

Scarcity To look at the world economically we can focus on the decisions that people make Economics is the study of how people seek to satisfy their needs and wants by making choices. Scarcity is the reason why people businesses and governments must make choices – Because all goods and services we produce are scarce that is limited quantities of resources to meet our unlimited wants.

Scarcity VS Shortage Scarcity always exists because our needs and wants are always greater than our resources can supply. Shortage occurs when production will not be able offer goods and services at the current price. They can be short or even long term.

Factors of Production LAND – All natural resources used to produce goods and services. Labor – It is the effort that a person devotes to a task for which one gets paid Capital – Is any human made resources that is used to produce other goods and services.

Physical Capital Human made objects used to make other goods and services. It is an important factor of production because it is used to save people and businesses lots of money and time How? Physical capital increases production

Human Capital People investing in themselves with knowledge and skill – Education – experience

ENTREPRENEURS These are the people who put the factors of production together that is they combine the factors of production to create goods and services These people are risk takers who fuel the economy with new industries businesses.