1. Warm Up 1/10/2013 Write a sentence that correctly uses the key words wants and scarcity.

2. The Economic Way of Thinking

3. Chapter 1: The Economic Way of Thinking KEY CONCEPT – Scarcity is the situation that exists because wants are unlimited and resources are limited.

4. What Is Scarcity? KEY CONCEPTS – Wants — desires that can be met by consuming products – Needs — things necessary for survival – Scarcity — lack of resources available to meet all human wants not a temporary shortage – Economics — study of how people use resources to satisfy wants examines how individuals and societies choose to use resources organizes, analyzes, interprets data about economic behaviors develops theories, economic laws to explain economy, predict future Scarcity: The Basic Economic Problem

5. What Is Scarcity? Principle 1: People Have Wants – People make choices about all their needs and wants – Wants are unlimited, ever changing

6. What Is Scarcity? Principle 2: Scarcity Affects Everyone – Scarcity affects which goods and services are provided

7. Scarcity Leads to Three Economic Questions Question 1: What Will Be Produced? – Societies must decide on mix of goods to produce depends in part on their natural resources – Some countries allow producers and consumers to decide – In other countries, governments decide – Must also decide how much to produce; choice depends on societies’ wants

8. Question 2: How Will It Be Produced? – Decisions on production methods involve using resources efficiently – Societies adopt different approaches with unskilled labor force, might use labor-intensive methods with skilled labor force, might use capital-intensive methods

9. Question 3: For Whom Will It Be Produced? – How goods and services are distributed involves two questions how should each person’s share be determined? how will goods and services be delivered to people? CountryBarrels/day 1Saudi Arabia10,520,000 2Russia10,270,000 3United States9,688,000 4Iran4,252,000 5China4,073,000

10. The Factors of Production Factor 1: Land – Land means all natural resources on or under the ground includes water, forests, wildlife, mineral deposits

11. The Factors of Production Factor 2: Labor – Labor is all the human time, effort, talent used to make products physical and mental effort used to make a good or provide a service

12. The Factors of Production Factor 3: Capital – Capital is a producer’s physical resources includes tools, machines, offices, stores, roads, vehicles sometimes called physical capital or real capital – Workers invest in human capital — knowledge and skills workers with more human capital are more productive

13. The Factors of Production Factor 4: Entrepreneurship – Entrepreneurship — vision, skill, ingenuity, willingness to take risks – Entrepreneurs anticipate consumer wants, satisfy these in new ways develop new products, methods of production, marketing or distributing risk time, energy, creativity, money to make a profit

14. Reviewing Key Concepts Explain the relationship between the terms in each of these pairs (#1 of your homework) – wants and scarcity (this was your warm up) – consumer and producer – factors of production and entrepreneurship