1. Econ “Scarcity: The Basic Economic Problem”
Unit 1, Chapter 1, Section 1

2. Objectives
explain how the economic definition of scarcity differs from the common definition
understand why scarcity affects everyone
learn three economic questions that societies face because of scarcity
describe the four factors of production and their uses

3. What is Scarcity?
scarcity: the situation that exists when there are not enough resources to meet human wants
economics involves: 1. how individuals, businesses, governments, and societies choose to use scarce resources to satisfy their wants 2. organizing, analyzing, and interpreting data about those economic behaviors 3. developing theories and economic laws that explain how the economy works and to predict what might happen in the future
Principle 1: People have wants- choice is central to the use of scarce resources; wants are unlimited and ever changing (computers)
Principle 2: Scarcity affects everyone- including which goods are made and which services are provided

4. unlimited wants
scarcity
limited resources
what to produce?
for whom to produce
how to produce?

5. Scarcity Leads to Three Economic Questions
Key Concept: scarcity confronts individuals, producers, and whole societies; every society must address 3 basic economic questions:
? 1: What will be produced? what to produce and how much depends on resources and consumer demand (except in N. Korea or Cuba)
? 2: How will it be produced? involves using scarce resources in the most efficient way to satisfy society’s wants (skilled labor in U.S. v. unskilled labor in China)
? 3: For whom will it be produced? how goods and services are distributed among people in a society-exactly how much should people get, and how it should be delivered to them

6. The Factors of Production
Key Concepts: Factors of Production are the economic resources needed to produce goods or services, and help answer the first 2 economic questions, what to produce and how to produce it
Factor 1-Land: all natural resources found on or under the ground that are used to produce goods and services
Factor 2-Labor: all the human time, effort, and talent that go into the production of goods and services are considered labor
Factor 3-Capital: all the physical resources made and used by people to produce and distribute goods and services are considered capital. So, too, are the knowledge and skills that make workers more productive
Factor 4-Entrepreneurship: the combination of vision, skill, ingenuity , and willingness to take risks that is needed to create and run new businesses