1. Factors of Production The resources required to produce the things we would like to have. The resources required to produce the things we would like to have. AKA. Resources, inputs AKA. Resources, inputs Land Land “gifts of nature”, “raw materials”“gifts of nature”, “raw materials” Forests, livestock, mineral deposits, etc.Forests, livestock, mineral deposits, etc. Are trees considered part of “land?”Are trees considered part of “land?”

2. Factors of Production (cont.) Labor Labor People — with all of their efforts, abilities, and skillsPeople — with all of their efforts, abilities, and skills This resource is considered variableThis resource is considered variable Capital (or Capital Goods) Capital (or Capital Goods) The tools, equipment, machinery, and factories used in the production of goods and services.The tools, equipment, machinery, and factories used in the production of goods and services. Capital goods help turn “ land ” into goodsCapital goods help turn “ land ” into goods Considered variableConsidered variable Financial Capital (money)Financial Capital (money)

3. Factors of Production (cont.) Entrepreneurs Entrepreneurs Risk-takers in search of profitsRisk-takers in search of profits The entrepreneur pools and organizes the factors of production to make goods and servicesThe entrepreneur pools and organizes the factors of production to make goods and services

4. Other Economic Concepts The Paradox of Value The Paradox of Value Why is it that water has little monetary value compared to diamonds?Why is it that water has little monetary value compared to diamonds? Points out the difference between necessity and valuePoints out the difference between necessity and value Value is a product of scarcity and utility (measured in utils)Value is a product of scarcity and utility (measured in utils)

5. The Production Possibilities Model Illustrates the alternatives and choices that society makes given its scarce resources Illustrates the alternatives and choices that society makes given its scarce resources This hypothetical society requires 4 assumptions This hypothetical society requires 4 assumptions Full EmploymentFull Employment Fixed resourcesFixed resources Fixed technologyFixed technology Two goods (usually Consumer goods and Capital goods)Two goods (usually Consumer goods and Capital goods)

6. Production Possibilities Model Production Alternatives Types of Product ABCDE Guns01234 Butter109740 The table shows the opportunity cost of producing one good over the other The table shows the opportunity cost of producing one good over the other The costs are increasing because resources are not perfectly suitable for both products The costs are increasing because resources are not perfectly suitable for both products