1. 1.1 The Economic Problem 1

2. Wants and Needs 2

3. Economic Choices 1.Economics is about making choices. 2.Scarcity is the condition facing all societies because there are not enough productive resources to satisfy people’s unlimited wants. 3.Productive resources, or factors of production, are the inputs used to produce the goods and services people want. 4.Because productive resources are scarce, goods and services are scarce too. 5.Making choices means you must pass up some alternatives. 3

4. “Although your wants and desires are virtually unlimited, the productive resources available to satisfy these wants are scarce.” 6.Economics is the study of how people use their scarce resources to satisfy their unlimited wants 4

5. Productive Resources 7. Are also called factors of production, inputs or resources. They are broken down into 3 categories: 8.Human resources is the broad category of human effort, both physical and mental, used to produce goods and services. a)Labor is the most important human resource b)An entrepreneur tries to earn a profit by developing a new product or finding a better way to produce and existing one. 5

6. Productive Resources (continued) 9. Natural resources are also called “gifts of nature,” including land, forests, minerals, oil reserves, bodies of water and even animals. a)Renewable resources can be drawn on indefinitely b)Exhaustible resources do not renew themselves, so they are available in limited amounts. 10.Capital resources are also called capital goods. They are creations used to produce goods and services. 6

7. Goods and Services 11. A good is tangible – something you can see, feel or touch. 12.A service is intangible, or not physical. Activity 7