1. Chapter 1.1 notes

2. Scarcity and the Science of Economics
Fundamental Economic problem:
scarcity – unlimited wants, limited resources
Economics – the study of how people try to satisfy unlimited wants through the careful use of relatively scarce resources.

3. must distinguish between needs and wants
everything comes at a price, even if it’s “free”
3 Basic questions:
What to produce?
How to produce?
For whom to produce?

4. 4 Factors of Production Land – “gifts of nature” not created by humans
Capital – tools, equipment, machinery and factories used in the production of goods and services. Financial capital - $ used to buy tools and equipment.
Labor- people and their efforts, abilities and skills; everyone except entrepreneurs

5. Cont’d
Entrepreneurs- risk takers in search of profits who does something new w/ existing resources; they are the driving force of economy by combining land, labor and capital into new products
Production- must have all factors present to create goods and services.

6. Chapter 1.1 questions
What is the basic economic problem facing all societies?
How is a need different than a want?
What does TINSTAAFL stand for, and what does it mean?
What are the 3 basic questions societies must answer about using resources?
List the factors of production and define them
What is production?