1. and allocation of those resources
Productive Resources
and allocation of those resources

2. Standards SSEF1b: Define and give examples of productive resources
SSEF1c: List a variety of strategies for allocating scarce resources

3. Unlimited wants & Limited Resources
Two terms, Same meaning
Productive Resources =
Factors of Production
The Factors of Production/Productive Resources are considered “Scarce Resources”.
Unlimited wants & Limited Resources

4. What are Productive Resources?
Anything used to produce goods and services There are 4 types of Productive Resources. We call them the “Factors of Production” Or FOP’s

5. Factors of Production Land – Examples: “Gifts of nature”
Anything that occurs naturally
Examples:

6. Factors of Production 2. Labor –
the physical abilities and time of human beings available to produce goods and services.

7. Factors of Production 3. Capital –
the tools, machines, and skills/knowledge/training of human beings.
Physical Capital – tools, machines, etc.
Human Capital – skills, knowledge, and/or training of individuals.

8. Factors of Production Entrepreneurship –
someone who takes a risk to start a business by bringing together the other three factors of production in an innovative way.

9. Land, Labor, Capital, Entrepreneurship
Need a way to remember?
Land, Labor, Capital, Entrepreneurship
Just use your CELL
(NOT that one!)
Capital
Entrepreneurship
Land
Labor

10. Now that we have productive resources….
What do we do with them?

11. Allocating Scarce Resources
Society has to decide how to allocate its scarce resources.
Allocate:
To distribute according to a plan

12. Allocation Strategies
Supply and Demand
Authority
Rationing of a resource based on who can afford the price set by the market.
More supply = Lower price
Less supply = Higher Price
A person or a group of people in power can make and implement a decision quickly.
Authoritarian governments decide how to distribute resources and enforces the decision through military/police power

13. Allocation Strategies
Random Selection
(Lottery)
First come,
First Served
This gives everyone who wants the resource equal odds of receiving it.
This strategy can be inefficient because it may allocate the resource to a purpose or person who does not need it or know how to produce using it. (Ex: Farm land
People receive a resource if they are the first one in line for it.
Concerts
Sporting events
Stores

14. Allocation Strategies
Personal
Characteristic
Contest
Resource go to the person who wins.
Race
Academics (valedictorian)
Test of knowledge
Resources are distributed based on need or merit.
Scholarships
Jobs

15. Thinking on the Margin In economics the term marginal = additional
Resources are allocated by weighing the additional benefit vs. the additional cost.
This is called MARGINAL ANALYSIS

16. Marginal Cost v. Marginal Benefit
Rational Decision Making takes place when marginal benefits equal or exceed marginal cost.
People make decisions based on costs and benefits
The benefits must equal or outweigh the costs.
RDM =
MB > MC

17. Which flight should you choose? Why?
Given the following assumptions, make a rational choice in your own self-interest (hold everything else constant)…
1. You want to visit your friend for the weekend
2. You work every weekday earning $100 per day
3. You have three flights to choose from:
Thursday Night Flight = $300
Friday Early Morning Flight = $345
Friday Night Flight = $380
Which flight should you choose? Why? 17