1. Chapter Essential Question
How can we make the best economic choices?

2. Describe the difference between needs and wants1.
Objectives
Describe the difference between needs and wants
Explain what is utility and scarcity.
Describe what entrepreneurs do.
Define the three factors of production and the differences between physical and human capital.
Explain how scarcity affects the factors of production.

3. Utility is the economic term for satisfaction/happiness/well-being2.
What is Economics
Utility and
Needs / Wants
Needs and wants are what we desire that gives us satisfaction/happiness/well-being
Utility is the economic term for satisfaction/happiness/well-being
Goods and services are things that satisfy our needs and wants and give us utility
Goods and Services
Needs/Wants
Utility
Satisfy
Gives Us

4. Utility is a key concept in economics 2.
What is Economics
Utility and
Needs / Wants
Utility is a key concept in economics
All consumers (households, people) want to MAXIMIZE utility.
We get utility through consumption and leisure
Consumption is buying goods and services
We have unlimited needs/wants
Scarcity of resources prevents us from unlimited utility. We call this a constraint

5. How does scarcity force people to make economic choices?2.
What is Economics
Scarcity and Choice
How does scarcity force people to make economic choices?
scarcity means that there are limited goods and services for unlimited wants.
People need to make choices in order to satisfy the wants that are most important to them.

6. Definition of Economics: 2.
What is Economics
Scarcity and Choice
Definition of Economics:
the study of how people make choices to use scarce resources to distribute goods/services to satisfy needs/wants

7. 3. Entrepreneurs are the groups of people that start businesses
First, they identify a need or want
Then, they get the resources together
Finally, they produce the good/service

8. 3.
Entrepreneurs
Entrepreneurs play a key role in turning scarce resources into goods and services.
Entrepreneurs are willing to take risks in order to make a profit. They:
Develop original ideas
Start businesses
Create new industries
Fuel economic growth
Some famous entrepreneurs: Bill Gates, Steve Jobs, Russell Simmons, Sean Combs, Mark Zuckerberg
Anyone who starts a business, including local stores on our blocks, is an entrepreneur!

9. An entrepreneur’s first task is to assemble the factors of production: land, labor, and capital.4.
Factors of Production:

10. These resources include: Fertile land for farming Oil Coal 4.
Factors of Production: Land
Land refers to all natural resources used to produce goods and services.
These resources include:
Fertile land for farming
Oil
Coal
Metals/Minerals
Water
Forests
Fish/Livestock

11. Labor is the work people do for pay/wages. Labor includes: 4.
Factors of Production: Labor
Labor is the work people do for pay/wages.
Labor includes:
The medical care provided by a doctor
The classroom instruction provided by a teacher
The tightening of a bolt by an assembly-line worker
The creation of a painting by an artist
The repair of a television by a technician
Most skilled labor is in service-oriented jobs, which is why EDUCATION IS KEY

12. Physical capital includes: Buildings 4.
Factors of Production: Capital
Capital refers to any human-made resource that is used to produce other goods and services.
An economy requires both physical and human capital to produce goods and services.
Physical capital includes:
Buildings
Equipment (including Tech – computers, etc.)
Tools
Human capital includes:
A college education
Training – technology or job-specific skills
Job experience

13. The benefits of capital include: Increased efficiency 4.
Benefits of Capital
Capital is a key factor of production because people and companies can use it to save a great deal of time and money.
The benefits of capital include:
Increased efficiency
Increased knowledge
Better time management
Increased productivity
The difference of capital in countries – both physical and human – is a key factor why there are developed (rich) and developing (poor) countries

14. Describe the difference between needs and wants
Explain what is utility and scarcity.
Describe what entrepreneurs do.
Define the three factors of production and the differences between physical and human capital.
Explain how scarcity affects the factors of production.
Needs are essential. Wants are things we would like, but not required
Utility is our satisfaction. Scarce resources means utility is constrained
Organize businesses to satisfy needs/wants by assembling scarce resources and make goods and services
Land, Labor, Capital; Physical – Man-made; Human – Knowledge
Limited factors of production means entrepreneurs make tough choices over which resources to use

15. need: something essential for survival
want: something that people desire but that is not necessary for survival
goods: the physical objects that someone produces
services: the actions or activities that one person performs for another
scarcity: the principle that limited amounts of goods and services available to meet unlimited wants
economics: the study of how people make choices to use scarce resources to distribute goods/services to satisfy needs/wants
utility: the total satisfaction gained from getting needs and wants
consumption: use of goods and services to generate utility
leisure: generates utility through time to enjoy life

16. entrepreneur: a person who decides how to combine resources to create goods and services
factors of production: the resources that are used to make goods and services
land: all natural resources used to produce goods and services
labor: the effort people devote to tasks for which they are paid
capital: any human-made resource that is used to produce other goods and services
physical capital: the human-made objects used to create other goods and services
human capital: the knowledge and skills a worker gains through education and experience