1. Chapter 1 What is Economics?
Section 1: Scarcity & the Factors of Production

2. Scarcity & Choice People cannot have everything they need & want
Need- necessary for survival
Want- Not essential
Must consider their options & decide which choice will fill their needs best

3. Ex: You must choose how to spend your time
Businesses must choose how many people to hire
Economics- study of how people seek to satisfy their needs & wants by making choices

4. Scarcity Defining scarcity
Implies limited quantities of resources to meet unlimited wants
No one can have an endless supply of everything
Sooner or later a limit is always reached
Economics is about solving the problem of scarcity

5. Scarcity v. Shortages
Shortages occur when producers will not or cannot offer goods & services at the current prices
Can be short or long term
Caused by wars or droughts

6. Scarcity always exists because our needs & wants are always greater than our resource supply
Goods & services are scarce because they are all made from resources that are scarce

7. The Factors of Production
All of the resources used to make goods & services
Land- all natural resources used to produce goods & services
Natural resources- fertile land for farming & products that are found in or on the land (coal, water, trees, etc.)

8. Labor- effort a person devotes to a task for which that person is paid
Capital- any human made resource that is used to produce other goods & service

9. Physical capital- human made objects used to create other goods & services
Can save people & companies a great deal of time & money
Ex: Buildings & tools
Buildings help workers do their work by providing protection & space
Tools help workers produce a good or service

10. Benefits
Ex: Doing the dishes v. using a dishwasher
Extra time
More knowledge
More productivity

11. Human capital- knowledge & skills a worker gains through education & experience

12. Entrepreneurs
Leaders who decide how to combine land, labor, & capital resources to create new goods & services
Take risks to develop original ideas, start businesses, create new industries, & fuel economic growth

13. Scarce resources
Supplies of land, labor, & capital used to produce it are scarce & that each resource has many alternative uses