Scarcity and the Factors of Production The study of economics begins with the idea that people can’t always have what they need and want.

Wants: Simply the desires of citizens. Wants: Simply the desires of citizens. Needs: These are basic requirements for survival like food and water and shelter. Needs: These are basic requirements for survival like food and water and shelter.

Economics is the study of how people seek to satisfy their needs and wants by making choices. To understand economics fully, economists must study each group that makes choices – individuals, groups, and through governments.

Goods: tangible commodities. These are bought, sold, traded and produced. Goods: tangible commodities. These are bought, sold, traded and produced.

Goods Consumer Goods: Goods that are intended for final use by the consumer. Consumer Goods: Goods that are intended for final use by the consumer. Capital Goods: Items used in the creation of other goods. factory machinery, trucks, etc. Capital Goods: Items used in the creation of other goods. factory machinery, trucks, etc. Durable Goods: Any good that lasts more than three years when used on a regular basis. Durable Goods: Any good that lasts more than three years when used on a regular basis. Non Durable Goods: Any item that lasts less than 3 years when used on a regular basis. Non Durable Goods: Any item that lasts less than 3 years when used on a regular basis.

Services: Services are actions or activities that one person performs for another. Examples: Services: Services are actions or activities that one person performs for another. Examples:

So what is scarcity? Scarcity: Limited quantity of resources to meet unlimited wants. Scarcity: Limited quantity of resources to meet unlimited wants. Examples: Examples:

Scarcity is the fundamental economic problem facing ALL societies. Essentially it is how to satisfy unlimited wants with limited resources. This is the issue that plagues all governments and peoples. Scarcity is the fundamental economic problem facing ALL societies. Essentially it is how to satisfy unlimited wants with limited resources. This is the issue that plagues all governments and peoples.

Factors of Production (Factor Resources) these are those elements that a nations has at its disposal to deal with the issue of scarcity. How efficiently these are used determines the measure of success a nation has. these are those elements that a nations has at its disposal to deal with the issue of scarcity. How efficiently these are used determines the measure of success a nation has.

They are: Land - natural resources, etc. What are natural resources? Land - natural resources, etc. What are natural resources? Labor - the work force; size, education, quality, work ethic. Labor - the work force; size, education, quality, work ethic. Capital – Any man-made resource that is used to produce other goods and services. Capital – Any man-made resource that is used to produce other goods and services.

Capital Physical Capital: Human made physical objects. Physical Capital: Human made physical objects. Human Capital: The knowledge and skills a worker gains through education and experience. Human Capital: The knowledge and skills a worker gains through education and experience.

Who pulls everything to make and provide goods and services? Entrepreneurs: Ambitious leaders who decide how to combine land, labor and capital resources to create new goods and services. Inventive and risk taking spirit. Entrepreneurs: Ambitious leaders who decide how to combine land, labor and capital resources to create new goods and services. Inventive and risk taking spirit.

Entrepreneurship It is estimated that 85% of small businesses go bankrupt during the first five years. And 85% of those that survive go bankrupt in the next five years. There is a great scarcity of good management talent in the world.