1. Economics
Unit #9

2. Economic Facts
In any society, people must make choices about how to use their resources to produce goods and services to satisfy their wants.
Elements to think about when looking at these economic facts:
Wants
Resources
Production of goods and services
Choices

3. Wants Everyone has wants.
Our most basic wants are for food, clothing and shelter.
People also want to be entertained, to be educated, and to have health care when they are sick.
People have an almost endless number of wants.
Many wants can only be satisfied only for a short time.

4. Using Resources
Factors of production are the resources people have for producing goods and services to satisfy their wants.
The three basic factors of production are
Labor
Land
Capital

5. Labor
Workers who apply their efforts, abilities, and skills to production
This includes everyone except entrepreneurs.
This resource may vary in size over time.

6. Land
Made up of the many natural resources that are needed to help produce goods and services.
Resources include soil, minerals, water, timber, fish and wildlife, and energy sources.
Fixed or limited in supply

7. Capital The means by which something is produced.
Two types of capital:
Goods—tools, equipment, machinery, and factories used in the production of goods and services.
Financial—the money used to buy the tools and equipment in production.

8. Production to Consumption
To produce the goods and services people want, the resources of labor, land, and capital must be combined in a process called production.
That is why these resources are called factors of production.

10. Example:
Farmers produce food by combining soil, water, and sunlight (land) with seeds and machinery (capital).
They also use their knowledge, skills, time, and energy, as well as that of their workers (labor).
Production is followed by distribution, the process by which goods and services are made available to the people who want them.
When goods and services have been produced and distributed, they are ready for consumption—the act of buying or using goods and services.

11. Making Choices
There are never enough resources to produce all the goods and services people want.
People in all societies must make choices.
These are economic choices.

12. Benefits vs. Costs
Look at the benefits you will receive from each of your possible choices.
Look at the costs of your choices. The major cost of any decision is giving up the benefits you would have received from the alternative.
Every economic decision has an opportunity cost—the highest valued benefit given up when a choice is made.

13. Scarcity
Resources are always limited compared with the number and variety of wants people have.
Based on the relationship between wants and the resources available to satisfy them.

14. 3 Basic Questions What to produce? How should we produce it?
For whom should we produce? Society must choose based on its population and other available markets.

15. Important considerations:
Quantity
Technology
Is everyone equal?