1. Economics--The study of human
efforts to satisfy unlimited and
competing wants through the use
of limited and scarce resources.
Economics was created as a
social science by Adam Smith
in the 1700’s.

2. *Smith wrote a book in 1776
called The Wealth of Nations.
-believed economics worked
according to natural law.
-believed division of labor was
the key to increased productivity.
-believed the economy would
prosper when the people were free
to make decisions about what to buy and produce.

3. *Economic system where the means of production are privately owned.
Capitalism
*Economic system where
the means of production
are privately owned.
(Private ownership of property)

4. 9 Components of Capitalism
1. Free enterprise
2. Privately owned businesses
3. Freedom
4. Voluntary Exchange
5. Very Little Gov’t Intervention
Consumer Sovereignty
Competition
Variety
Low Price

5. Profit Motive--the driving
force that motivates people to
improve their well-being
Importance of Profit Motive
1. Keeps people working
2. Keeps companies looking to
lower production costs while
improving quality.

6. Products--Things that have
usefulness in satisfying wants.
Goods
(Tangible)
Services
(Intangible)

7. True or False. Goods and services must be legal and/or socially
desirable to be considered
as an actual product.

8. Goods and services do NOT have to be socially desirable or even legal to be considered as a
product.
Examples
-drugs
-gambling
-prostitution

9. 5 Factors of Production
1. Land--anything existing w/out
human effort.
2. Labor--human resources.
3. Capital--anything used to run a
business.

10. **The factors of production are used to create products.
4. Entreprenuership--person who
is willing to take the risk to start
a business.
5. Technology--makes a business
run more efficiently.
**The factors of production
are used to create products.