ECONOMICSECONOMICS

What is Economics?What is Economics? Economics is the study of choices Economics is the study of choices

and decisions people make about and decisions people make about how to use the world’s resources.how to use the world’s resources.

Meeting unlimited wants and needs Meeting unlimited wants and needs of a society with limited resources.of a society with limited resources.

Merriam-Webster Dictionary defines Merriam-Webster Dictionary defines Economics as Economics as 1 a1 a :: a social science a social science concerned chiefly with description and concerned chiefly with description and analysis of the production, distribution, and analysis of the production, distribution, and consumption of goods and services.consumption of goods and services.

ScarcityScarcity People are forced to make decisions and People are forced to make decisions and

choices, because we cannot have choices, because we cannot have everything we need or want.everything we need or want.

It is the condition that It is the condition that ALWAYSALWAYS exists exists where we try to satisfy our unlimited where we try to satisfy our unlimited wants with limited resourceswants with limited resources

Economics is the study of people trying to Economics is the study of people trying to solve this problem.solve this problem.

Think of scarcity as a permanent loss of Think of scarcity as a permanent loss of some resourcesome resource

Scarcity ContinuedScarcity Continued Scarcity is different than a shortage. When Scarcity is different than a shortage. When

goods or services are in a period of shortage, goods or services are in a period of shortage, they are gone temporarily. This suggests they are gone temporarily. This suggests that at some point they will come back. If that at some point they will come back. If goods or services are in scarcity, they are goods or services are in scarcity, they are

gone forevergone forever. . Goods and services are scarce, Goods and services are scarce,

because they are made from because they are made from scarce resources.scarce resources.

Need vs. Want Need vs. Want (What is the difference?)(What is the difference?)

NeedNeed: Necessary for Survival: Necessary for Survival Examples (air, food, shelter, Examples (air, food, shelter,

water)water)

WantWant: An item we desire, but is : An item we desire, but is not essential to survival.not essential to survival.

What are some examples of wants?What are some examples of wants?

Factors of ProductionFactors of Production

There are four factors of productionThere are four factors of production Factors of production are the resources Factors of production are the resources

that go into making a good or servicethat go into making a good or service

Good-Actual product/tangible ItemGood-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.you do not have to do it.

Factors of Factors of ProductionProduction

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

All natural resources that go into making goods All natural resources that go into making goods and servicesand services

Factors of Factors of ProductionProduction

LABOR: Uses capital on land LABOR: Uses capital on land to produce to produce wealth. Refers to . Refers to human resources or the work human resources or the work that people do.that people do.

All workers in the economy All workers in the economy that produce goods and that produce goods and servicesservices

Factors of Factors of ProductionProduction

Capital:Capital:

Physical CapitalPhysical Capital – Also called capital goods, all of the – Also called capital goods, all of the resources that are man-made.resources that are man-made.

Man made resource s that are used to help produce Man made resource s that are used to help produce goods and services (cannot be a human)goods and services (cannot be a human)

Increases productivity by saving timeIncreases productivity by saving time

Human CapitalHuman Capital – – The sum of workers skills and talentsThe sum of workers skills and talents Increased by: training, education, motivationIncreased by: training, education, motivation Both types of Capital are needed to produce goods Both types of Capital are needed to produce goods

and services.and services.

Factors of Factors of ProductionProduction

ENTREPRENEURSHIPENTREPRENEURSHIP: People that take : People that take risks to start businesses and keep the risks to start businesses and keep the economy running.economy running.

They gather and implement the factors of They gather and implement the factors of production to create goods/services production to create goods/services needed or desired in an economy.needed or desired in an economy.

Think of Entrepreneurs as people that Think of Entrepreneurs as people that take land, labor and capital to produce take land, labor and capital to produce their own goods and servicestheir own goods and services

Examples of EntrepreneursExamples of Entrepreneurs

Terms to knowTerms to know Goods:Goods: Shortage:Shortage: Services:Services: Scarcity:Scarcity: Natural Natural Robotics:Robotics:

Resources:Resources: Automation:Automation: Man Made Man Made

Resources:Resources: Renewable Renewable

Resources:Resources: Nonrenewable Nonrenewable

Resources:Resources:

Answer ?Answer ?1.1. Why are goods made from scarce resources also Why are goods made from scarce resources also

scarce?scarce?

2.2. How are scarcity and shortage different?How are scarcity and shortage different?

3.3. What are the two types of Capitol? Explain each.What are the two types of Capitol? Explain each.

4.4. List the four factors of production. Give an example List the four factors of production. Give an example of each.of each.

5.5. If you were an Entrepreneur and had to spend If you were an Entrepreneur and had to spend $100,000 on land, labor or capitol, which would you $100,000 on land, labor or capitol, which would you commit your money to and why? (You must commit commit your money to and why? (You must commit all of your money to one or the other.)all of your money to one or the other.)