Productive Resources Natural resources, human resources, capital resources and entrepreneurship used to make goods and services. Natural Resources or land. Include “gifts of nature” such as timber, water, minerals deposits, and wind. Human Resources or labor. The number of workers and the health, education, experience, training, skills and values of people.

Capital Resources and goods made and used to produce other goods and services. Examples include buildings, machinery, tools, and equipment.

Entrepreneurship. A characteristic of people who assume the risk of organizing productive resources to produce goods and services.

The Problem of Scarcity Scarcity is the central problem of Economics. Scarcity forces us to make choices. Economics is the study of how those choices are made.

Economic Incentives. Factors that motivate and influence the behavior of individuals and organizations, including firms and government agencies. Prices, profits and losses are important economic incentives in a market economy.

Economic Way of Thinking A reasoning process that involves considering costs as well as benefits in making decisions.

Economic Models An Economic Model is a simplification o fthe real world meant to give us insight into an economic reality. Ceteris paribus assumption – Latin for “all else being equal”; an assumption we will use when working with economic models.

Microeconomics vs. Macroeconomics Microeconomics. The study of economics concerned with individual units of the economy such as households, firms, and markets. Macroeconomics. The study of economics concerned with the economy as a whole, involving aggregate demand, aggregate supple, and monetary and fiscal policy.