1. Fundamentals of Economics
1.1 Scarcity
Fundamentals of Economics

2. Learning Objectives
Explain why scarcity and choice are the basis of economics in every society.
Summarize how entrepreneurs fuel economic growth.
Describe the three economic factors of production and the differences between physical and human capital.
Explain how scarcity affects the factors of production.

3. Consider The Following
You have so many different ways you can spend your money. You really want a new video game. You also want to upgrade to the newest smartphone model. At the same time, you need to pay your car insurance. With limited funds, you can’t have it all. How will you choose?

4. Scarcity Means Making Choices
Unlimited Wants, Limited Resources
A need is something essential for survival. (ex. food or medical care)
A want is something we desire but is not necessary for survival. (ex. video games or luxury vehicles)

5. Unlimited Wants, Limited Resources
People satisfy their needs and wants with goods and services.
Goods are physical objects that someone produces, such as food, clothing or vehicles.
Services are actions or activities that one person performs for another. Ex. Haircuts and medical care.
Economics is the study of how people seek to satisfy their needs and wants by making choices.

6. Scarcity Does Not Mean Shortage
A shortage occurs when consumers want more of a good or service than producers are willing to make available at a particular price.
For instance, Beyonce fans will find a shortage of $20 seats at one of her concerts. Performers and promoters are simply not willing to provide many seats at that price.

7. Why do we have Scarcity?
We have unlimited wants and needs but limited resources create scarcity so we need to make choices.

8. Entrepreneurs Use Factors of Production
Entrepreneurs play a key role in turning scarce resources into goods and services.
Entrepreneurs are people who decide how to combine resources to create new goods and services.
Anyone who opens a business, large or small, is an entrepreneur.
To make a profit, entrepreneurs are willing to take risks.
They develop new ideas, start businesses, and, if they are successful, even create new industries.
By producing new goods and services and hiring workers, they fuel economic growth.

9. Factors of Production
Land- All natural resources used to produce goods and services
Labor- The effort people devote to tasks for which they are paid.
Capital- Any human-made resource used to produce other goods and services.
Physical capital- Human-made object used to produce other goods and services.
Human capital- Knowledge and skills a worker gains through education and experience.
An economy requires both physical and human capital.
Ex. Carpenters require both tools and the skills they gain from training and practice.

10. Closing Activity
If you were going to become an entrepreneur, what good or service would you provide? List the factors of production associated with your business venture.