The Start of Economics J. Worley Civics

Factors of Production & Their Economic Impact 7.01

What is Economics? It is the study of how individuals, firms, and nations can best allocate their limited resources. Best put- How people can get the most out of what they want or need

4 Factors of Production Land –Includes not only property on which the plant is built but all natural resources involved –In economic terms, it is more than the ground you stand on Labor –Contribution of human workers to the production process –In economic terms, it includes the mental efforts as well as physical efforts & highly skilled workers as well as unskilled workers

4 Factors of Production (cont.) Capital –All the structures and equipment involved in the manufacturing process –In economic terms, it is the building, machinery, tools, lighting, & assembly line Entrepreneurship –Consists of the creative, managerial, and risk-taking capabilities involved in starting up and running a business –In economic terms, it involves the organizing, developing, & raising of funds to run a business

Wants vs. Needs Wants –All of the goods and services one desires and would obtain if he/she could Needs –The things people must have to live –EX- Clothing, Food, Shelter, etc. Everyone one wants stuff but we have to have the resources to get it. Needs will always take precedence over wants in 99% of households

Natural Resources Renewable Resources –Resources that can be replenished over time –EX- Timber Nonrenewable Resources –Resources that cannot be replaced over time –EX- Crude Oil

Productivity The rate at which goods/services can be produced This is key in determining economic growth Increased productivity means there are more products available to buyers

Scarcity & its Influence on Society 7.02

Scarcity This is the lack of adequate resources to obtain all of one’s wants and/or needs This is an economic word and does not need to be confused with rare –Hurricanes are rare and people don’t produce them As scarcity of a product is increased, the price of the product increases as well (Less common) Visa Versa when scarcity decreases

Scarcity (cont.) Wants vs. Needs during Scarcity –Needs become a must and Wants are something that are never talked about –EX- During a Recession- Luxury Items

Items under the Scarcity Umbrella Services –Activities performed to satisfy wants and needs –EX- Medical Care, Education, Trash Pick-up, Massages, Mechanics Repair, etc. –People are always seeking the lowest possible price for these Goods –Material products made to satisfy wants and needs –EX- Hot dogs, frisbees, cars, medicine, etc

Items under the Scarcity Umbrella (cont.) Wages –Money paid to a person by the hour in exchange for their labor –EX- Working at a Grocery Store Salary –A fixed compensation paid to a person in exchange for their labor –EX- Teachers

Decision-Making Process Decision-Making Model (p. 152 Blue) –Define the Problem –List the Alternatives –State the Criteria –Evaluate the Alternatives –Make a Decision WOULD GO OVER THIS MULTIPLE TIMES TO MAKE SURE I KNEW

Decision-Making Process (cont.) Consumer –Economic actor purchasing or receiving the goods and/or services Producer –Economic actor who makes or provides the goods and/or services –Producer has to consider salaries/wages, goods, and services when setting a price

Decision-Making Process (cont.) Pricing –Monetary value on producers’ output by establishing the amount of money for which they will be willing to exchange their goods and services with consumers –AKA- What they are willing to sell their product for Opportunity Costs –The value of the alternative option that is lost when one makes the decision –What is lost when you pay for gas instead of buying that magazine