1. Chapter 1, Section 1 Scarcity and the Science of Economics Fatmeh Reda
Information compiled from: Glencoe Economics: Principles and Practices

2. The Fundamental Economic Problem
Think of a time that you wanted something and you couldn’t have it…
Think of a time you had something and you wanted something better…
Think of a time you wanted something and you felt like you had to have it… but it wasn’t a necessity….
We All Want More Than We Have

3. Scarcity The main problem in economics is SCARCITY
This is the condition that results from society not having enough RESOURCES to produce [or make] al the things that people would like to have
And so, ECONOMICS is the study of how people try to satisfy their endless wants through the careful use of scarce resources

4. Needs and Wants Break-Up Activity
Basic requirement for survival
Examples: food, shelter, clothing
WANT
Something we would like to have but is not needed for survival
Examples: toys, movies, books, music players
Break-Up Activity
In pairs, make a list of items in your notes of things you think are NEEDS. And then make a list of things you think are WANTS.

5. Three Basic Questions
Because we live in a society that has scarce resources, we need to make careful economic choices about how we are going to use these resources.

6. WHAT to Produce
Should the resources be used to make equipment for the military or to make food?
Should a piece of empty land in a city be used to build a community park or more houses?
Should the land be used to make houses for low-income people, middle-income, or high-income?
Should we use farmland to produce more corn or use it to raise cows for meat?

7. HOW to Produce
Should factories use only machinery or should workers?
Should factories add more machinery and fire people, or take our machinery and hire more people? OR

8. FOR WHOM to Produce
This decision is about who will receive the things produced
Are houses for low-income workers, professionals, or the very rich?
Think about target audience and who will buy the product
Who is the target audience for the new Call of Duty game?
Who is the target audience for the Twilight series?

9. Factors of Production
There are four resources- land, capital, labor, and entrepreneurs, that are needed to produce the goods and services we want.

10. Land “gifts of nature” Natural resources not created by humans
Includes: deserts, fertile fields, forests, mineral deposits, livestock, sunshine, climate
Because its limited, we call is a fixed or limited supply

11. Capital Sometimes called CAPITAL GOODS
These are the tools, machinery, equipment, and factories used in to produce goods and services
These were themselves once the result of production

12. Labor
People with all their efforts, abilities, and skills

13. Entrepreneurs
Risk takers in search of profits who does something new with existing resources
Driving force behind the economy because they start a new business or bring new products into the market

14. The Scope of Economics
Economics is a social science because it deals with the behavior of people as they deal with scarcity
Four elements to the study of Economics: description, analysis, explanation, and prediction

15. Description Describes economic activity
GROSS DOMESTIC PRODUCT [GDP]: dollar value of all final goods, services, and structures produced within a country’s borders in a 12-month period
This is the most COMPREHENSIVE measure of a country’s total output and measures nation’s economic health

16. Analysis
Helps to discover why things work and how things happen, and why things are the way they are
Examples:
Why are gas prices so high?
Why are not enough wii made? And how does this affect the price of a wii system?

17. Explanation They communicate knowledge after they analyze something
Examples:
Gas prices are high because the United States stopped importing gasoline from Venezuela.
Orange juice prices went up because Florida suffered a freeze two weeks ago and they lost a major part of their crop
Corn is so cheap because many farm and factories produced corn to the point that there is more corn that is needed.

18. Prediction Making smart guesses about what might occur in the future
Examples:
Economists predict that house values will continue to decrease in the next two years as more and more homes go on foreclosure.
Economists can predict that based on previous sales of the wii system, coming up with a newly upgraded system will sell out within a few days.