1. BUSINESS MANAGEMENT PAVONE 3-1 ECONOMIC WANTS

2. SATISFYING OUR ECONOMIC WANTS Economics – The body of knowledge that relates to producing and using goods and services that satisfy human wants. Economic Wants – The desire for scarce material goods and services. Material goods can be clothing, housing, cars, etc. Services can be hair care, medical attention, public transportation, etc. Noneconomic Wants – The desire for nonmaterial things that are not scarce, such as air, sunshine, friendship and happiness.

3. UTILITY Utility – The ability of a good or service to satisfy a want. Producer – Anyone who creates a utility. There are four types of utility: Form Utility, which is created by changes in the form or shape of a product to make it useful. Place Utility, which is created by having a good or service at the place where it is wanted or needed. Time Utility, which is created when a product or service is available when it is needed or wanted. Possession Utility, which is created when ownership of a good or service is transferred from one person to another, but may also occur through renting and borrowing.

4. FACTORS OF PRODUCTION Factors of Production – What a producer uses in creating useful goods and services; they are: Land (natural resources) Labor Capital goods Entrepreneurship

5. NATURAL RESOURCES Natural Resources – Anything provided by nature that affects the productive ability of a country. Example: The United States ’ productive ability depends on fertile soil, minerals, water, timber resources and mild climate.

6. LABOR Labor – The human effort, either mental or physical, that goes into the production or goods and services. Human Capital – The accumulated knowledge and skills of human beings; the total value of each person’s education and acquired skills. In today’s world, technology and special equipment make physical effort much less important than mental effort.

7. CAPITAL GOODS Capital Goods – Buildings, tools, machines and other equipment that are used to produce other goods but do not directly satisfy human wants. Example: A robot on an assembly line is a capital good; it does not satisfy human wants, but it assembles cars that do satisfy human wants.

8. ENTREPRENEURSHIP Someone, or a group, must take the risks involved in starting a business and planning and managing the production of a final product. Entrepreneurship brings together the other three factors.

9. CAPITAL FORMATION Capital Formation – Production of capital goods. Consumer Goods and Services – Goods and services that directly satisfy people’s economic wants. When the production of consumer goods and services increases, the production of capital goods decreases. When the production of consumer goods and services decreases, the production of capital goods increases. When productive resources are used for capital formation, it becomes possible to produce more consumer goods. If using resources to produce capital goods, less resources can be used to produce consumer goods.