1. Learning Objectives: The Economic Problem LO1: Understand the relevance of economics LO2: Define economics, microeconomics, and macroeconomics and understand the importance of the scientific method LO3: Realize that scarcity, choice, and opportunity cost are at the heart of economics and that efficiency is a cornerstone CHAPTER 1 1-1© 2012 McGraw-Hill Ryerson Limited

2. Scarcity and Choice Resources are Scarce: – Resources, or “factors of production”, are anything used to produce goods and services – Do not have enough resources to produce everything everybody wants – Must have some way to ration scarce resources 1-2© 2012 McGraw-Hill Ryerson Limited LO3

3. Economic Resources Labour - Human mental and physical effort Land – Any natural resource used to produce goods or services Capital – Tools, equipment, factories, and buildings used in production process Enterprise – The human resource that innovates and takes risks 1-3© 2012 McGraw-Hill Ryerson Limited LO3

4. Economic Resources 1-4© 2012 McGraw-Hill Ryerson Limited RESOURCE:EARNS: LabourWages LandRent CapitalInterest EnterpriseProfit LO3

5. Self-Test 1-5© 2012 McGraw-Hill Ryerson Limited Indicate whether the resource in question is labour (L), capital (K), land (N), or enterprise (E): a.A bar-code scanner in a supermarket b.Fresh drinking water c.Copper deposits in a mine d.The work of a systems analyst e.The first application of e- technology to an economics textbook f.An office building LO3

6. Economic Resources Technology -Method of production -Way in which resources are combined to produce goods and services Opportunity Cost -The value of the next-best alternative that is given up as a result of making a particular choice 1-6© 2012 McGraw-Hill Ryerson Limited LO3