ECONOMICS

What is Economics?  Economics is the study of choices and decisions people make about how to use the world’s resources.  Meeting unlimited wants and needs of a society with limited resources.  Merriam-Webster Dictionary defines Economics as 1 a : a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.

Scarcity  People are forced to make decisions and choices, because we cannot have everything we need or want.  It is the condition that ALWAYS exists where we try to satisfy our unlimited wants with limited resources  Economics is the study of people trying to solve this problem.  Think of scarcity as a permanent loss of some resource

Scarcity Continued  Scarcity is different than a shortage. When goods or services are in a period of shortage, they are gone temporarily. This suggests that at some point they will come back. If goods or services are in scarcity, they are gone forever.  Goods and services are scarce, because they are made from scarce resources.

Need vs. Want (What is the difference?)  Need: Necessary for Survival Examples (air, food, shelter, water) Examples (air, food, shelter, water) Want: An item we desire, but is not essential to survival. Want: An item we desire, but is not essential to survival. What are some examples of wants? What are some examples of wants?

Factors of Production  There are four factors of production  Factors of production are the resources that go into making a good or service Good-Actual product/tangible Item Good-Actual product/tangible Item Service-Something that is provided for you so Service-Something that is provided for you so you do not have to do it.

Factors of Production  LAND: (NATURAL RESOURCES) Defined as everything in the universe that is not created by human beings. It includes more than the mere surface of the earth. Air, sunlight, forests, earth, water and minerals are all classified as land, as are all manner of natural forces or opportunities that are not created by people.  All natural resources that go into making goods and services

Factors of Production  LABOR: Uses capital on land to produce wealth. Refers to human resources or the work that people do. wealth  All workers in the economy that produce goods and services

Factors of Production  Capital: Physical Capital – Also called capital goods, all of the resources that are man-made. Man made resource s that are used to help produce goods and services (cannot be a human) Man made resource s that are used to help produce goods and services (cannot be a human) Increases productivity by saving time Increases productivity by saving time Human Capital – The sum of workers skills and talents The sum of workers skills and talents Increased by: training, education, motivation Increased by: training, education, motivation Both types of Capital are needed to produce goods and services. Both types of Capital are needed to produce goods and services.

Factors of Production  ENTREPRENEURSHIP: People that take risks to start businesses and keep the economy running.  They gather and implement the factors of production to create goods/services needed or desired in an economy.  Think of Entrepreneurs as people that take land, labor and capital to produce their own goods and services

Examples of Entrepreneurs

Terms to know  Goods:Shortage:  Services:Scarcity:  Natural Robotics: Resources:Automation:  Man Made Resources:  Renewable Resources:  Nonrenewable Resources:

Answer ? 1. Why are goods made from scarce resources also scarce? 2. How are scarcity and shortage different? 3. What are the two types of Capitol? Explain each. 4. List the four factors of production. Give an example of each. 5. If you were an Entrepreneur and had to spend $100,000 on land, labor or capitol, which would you commit your money to and why? (You must commit all of your money to one or the other.)