1. Grab a textbook and: 1) write down the new vocabulary words for Chapter 2 and their definitions. 2) pick one word to explain to our classmates

2. Chapter 2

3.  The fundamental economic problem facing all societies is Scarcity. Scarcity is the condition that results in society not having enough resources to produce all the things people would like to have. Even goods and services are scarce, because the resources we need to produce them are scarce

4.  A NEED is a basic requirement for survival!!! ◦ Food ◦ Water ◦ Shelter etc.  A WANT is a way of expressing a need  WANTS satisfy needs  WANTS are broader than NEEDS

5. ShortageScarcity  Lack of something that is desired  Less of a good or service available than what people are willing to pay at the current price  Shortage lasts until more produced or desire ends  Simply not enough of everything to satisfy all of our wants  Permanent condition Scarcity and Shortage Handout/Activity

6.  By inputs, outputs and the production equation  Inputs = scarce resources that go into the process  Outputs = goods and services produced by these resources  Production Equation = Land + labor + Capital = Goods and Services *Entrepreneurship?

7. Unlimited WantsLimited Resources SCARCITY CHOICES WHAT To Produce HOW To Produce FOR WHOM To Produce

8.  Land ◦ “Gifts of Nature” ◦ Natural resources not created by human effort ◦ Examples:  Deserts  Fertile fields  Forests  Animals, birds  Sunshine  Climate ◦ Includes both renewable and nonrenewable resources

9.  Labor ◦ The time and effort people devote to producing goods and services in exchange for wages ◦ Includes both physical and mental labor ◦ Human capital = knowledge and skill gained from education or training ◦ Strong correlation between country’s level of human capital and standard of living

10.  Capital ◦ Physical capital or capital goods = Tools, equipment, factories or buildings used in production of goods and services ◦ Financial Capital = money to invest in stocks, bonds, real estate, or businesses to produce future wealth

11. Land LaborCapital Goods & Services

12.  Entrepreneurs ◦ Some economists consider Entrepreneurship the 4 th factor of production ◦ A risk-taker in search of profits ◦ Innovative workers who are responsible for economic change  Start new businesses  Create new products  Innovative use of resources

13.  When the four factors of production (land, capital, labor, entrepreneurship) are present, PRODUCTION, or the process of creating goods and services, can take place  IMPORTANT!!! – Everything we produce requires all four factors

14. Four Factors of Production Handout

15.  Factors of production  “I, Pencil”  https://www.youtube.com/watch?v=IYO3tOq DISE https://www.youtube.com/watch?v=IYO3tOq DISE  Scarcity, Choices, and Exchange  Anyone like Star Wars?  http://www.youtube.com/watch?v=Np- dZSdzymk http://www.youtube.com/watch?v=Np- dZSdzymk