1. GOODSSERVICES Physical objects produced for sale Activities done for us by others All kinds of goods and services are scarce (limited) because all of the resources needed to go into them (land, labor, materials, and machines) are scarce (limited)

2. Inputs - the scarce resources that go into producing a good or service These resources are called factors of production They include: Land, Labor and Capital Outputs – are the goods and services produced by these resources

3. The Production Equation represents the process of turning the factors of production (inputs) into goods and services (outputs) The Production Equation looks like this: LAND + LABOR + CAPITAL = GOODS AND SERVICES (INPUTS) = (OUTPUTS)

4. Some economists consider entrepreneurship ( the willingness to take the risks involved in starting a business) as a fourth factor of production. Entrepreneurs are said to gather together the Land, Labor and Capital in order to create new goods and services

5. Land - NOT just real estate! -All gifts of nature used to create goods and services Including: air, soil, minerals, forests, plants, Animals, birds, fish, sunlight, wind, geothermal energy, electro magnetic spectrum

6. Perpetual: Sunlight, Wind – no danger of being used up. Renewable: forests, fresh water, fish - with planning can be replaced as they are used Non-renewable: fossil fuels like oil products coal and natural gas - When they are used they cannot be replaced

7. The quality of this labor depends on: The size of the available workforce The willingness of this population to do the work required The skill of the workers Labor - The time and effort people devote to producing goods and services.

8. Human Capital - The knowledge and skills that people gain from education, on-the-job training and experience

9. EXAMPLES: A car used for deliveries The saw and hammer a carpenter uses Computers A factory building Office buildings Capital (physical capital/capital goods)- The tools, machines and buildings used in the production of goods and services

10. IMPORTANT SIDE NOTE As technology improves, capital can replace workers. EXAMPLE: During the Industrial Revolution of the 19 th Century, textile workers are replaced by Water-driven spinning machines However, with every new technology comes new kinds of jobs, (People are needed to Build and repair the new machines.)

11. An ENTREPRENEUR is an important part of this production process. Innovator – thinks of ways to turn new inventions, technologies and techniques into goods/services Strategist – supplies the vision and plans for A new enterprise to suceed Risk taker – invests time energy abilities and money not knowing for sure if the idea will suceed or fail “Sparkplug” – the driving force

12. We cannot produce all the goods and services that everybody wants But by using these inputs more efficiently, We can improve efficiency. Productivity – the measure of the output of an economy per unit of input PRODUCTIVITY = Output --------- Input

13. Productivity can be increased in two ways: 1.Getting more output from the same amount of input 1.Getting the same output from less inputs