What is Economics Chapter 1 Section 1 Scarcity & Factors of Production http://www.reffonomics.com/TRB/chapter1/whatiseconomics1.swf

What is Economics Objectives: 1. Explain why scarcity and choice are basic problems of economics. 2. Identify land, labor, and capital as the three factors of production, and identify the two types of capital. 3. Explain the role of entrepreneurs. 4. Explain why economists say all resources are scarce.

What is Economics Look at three scenarios: 1. Members of a household work together to do the laundry, purchase groceries, make meals, earn money, decide how to spend their money, and decide who gets to hold the TV remote.

What is Economics Look at three scenarios: 2. The leaders of a large corporation sit at a table for their monthly meeting. They discuss whether to add a new product to their product line and advertising options on television and the Internet.

What is Economics Look at three scenarios: 3. Senators in the US Congress gather to debate the important issues of the day: How can we ensure that people are well fed and have access to health care. What limits should the government place on businesses and international trade? Who gets to control the Internet”

What is Economics Economists look at the decisions made in each scenario and study those decisions in great detail.

What is Economics Scarcity & Choice: The study of economics begins with the idea that people cannot have everything they need and want. A need is something like air, food, shelter (basic items for survival). A want is an item that we desire but are not essential for survival.

What is Economics You need a way to school. A bike Ride the bus Walking Mom drives you A bike Ride the bus

What is Economics Instead you want this type of ride A Hummer H2 A Lamborghini An Escalade A stretch Limousine

What is Economics Scarcity & Choice: Because people cannot have everything they need or want, they must consider their options and decide which choice will fill their needs the best.

What is Economics As a student you have decided to use your time by coming to school instead of staying in bed and getting a few more hours of sleep.

What is Economics Scarcity & Choice: Economics is the study of how people seek to satisfy their needs and wants by making choices. Why must people make choices????

What is Economics Good – physical objects such as shoes & shirts.

What is Economics Services – are actions or activities that one person performs for another. i.e.

What is Economics Scarcity & Choice: Because of Scarcity We in America have a hard time understanding scarcity since our store shelves are filled with all kinds of goods.

What is Economics Scarcity: it exists in all places, at all times. Defining Scarcity – implies limited quantities of resources to meet unlimited wants. Scarcity is not the same thing as a shortage. A shortage occurs when producers will not or cannot offer goods or services at the current price. They are temporary- sometimes can be long-term.

What is Economics Factors of Production: Resources that are used to make goods and services. 1. Land All natural resources used to produce goods and services. Include fertile land, coal, water, forests, cattle, and etc.

What is Economics 2. Labor The effort that a person devotes to a task for which that person is paid.

What is Economics 3. Capital Any human-made object used to produce other goods and services.

What is Economics 2 Types of Capital: Physical – human-made objects used to create other goods and services. i.e. buildings, tools, equipment, and etc. An oven in a bakery; a sewing machine in a clothing factory; bulldozer to clear land for homes Human Capital – the knowledge and skills a worker gains through education and experience. A country needs physical and human capital to produce goods and services.

What is Economics Factors of Production: 4. Entrepreneurship/Entrepreneurs The leaders who combine the land, labor, and capital together to make a good or service. They are the risk-takers by starting new businesses, develop new ideas, create new industries, and fuel economic growth. Bill Gates – Microsoft Henry Ford – Ford Motor Company

What is Economics Scarce Resources: Economists say that all goods and services are scarce because the land, labor, and capital used to create them are scarce. Any good that we can talk about would be considered to be scarce since the land, labor, and capital to produce that good is scarce.

What is Economics REVIEW: 1. What is the difference between a good and a service? 2. Why is the idea of scarcity a starting point for thinking economically? 3. How is scarcity different from shortage? 4. List and describe the four factors of production. 5. What special advantages does physical capital offer? 6. What role do entrepreneurs play in the economy?

What is Economics 1. good – a physical object Service – action or activities perform by someone 2. Economics seeks to solve the scarcity problem, which exits because resources are limited whereas needs and wants are unlimited. 3. Scarcity always exits because goods and services are produced from limited resources. Shortages can be temporary or long-term and occur only when producers will not or cannot offer goods and services at current prices. 4. Land includes any natural resources used to produce goods and services, such as fertile soil or coal. Labor is the effort that one person exerts for another and for which the first person is paid. Capital is any human-made resource used to produce goods and services.

What is Economics 5. Physical capital provides extra time, increased knowledge, and/or greater productivity. 6. Entrepreneurs decide how to combine the factors of production to create new goods and services.