What Do You Mean You’re Out!?

The Science of Scarcity

Need VS. WantOne night only

Water Rib-Eye Steak Food Exxon Gas Gas Shelter A Five Bedroom Home

NEED WANT NEED WANT NEED NEED WANT

TINSTAAFL

T-There I-Is N-No S-Such T-Thing A-As A-A F-Free L-Lunch

Sure there is!

You have a coupon for Buy one, get one free lunch at Wendy’s

Totally free to you, right?

WRONG

Though its free to you someone had to…– Pay the Rancher for his cattle

– Pay the Truck Driver for delivery

– Pay the cook for preparing the food

How does a business handle this?

Simply hidden costs– Typically the cost of your “free” burger is rolled

into the costs of something else Wendy’s sells Frosties Chili Salad

– In the end someone always pays for the “Free” lunch.

Three Questions

When owning or operating a business there are three questions you must ask yourself.– What am I going to produce?– How am I going to produce it?– Who am I going to produce it for?

Four Factors of Production

Land-Where you produce your goods Capital-It’s the money, tools, equipment,

machinery and factories used to produce your goods.

Labor-the people who help build your goods Entrepreneurs- You, the owners of the

company who took the risk in the pursuit of financial gain.

Gross Domestic Product-GDP

The GDP is simply the final dollar amount of all final goods and services within the borders of a country.

Current US GDP: – 14.7 Trillion

Revenues: – $2.162 trillion

Expenditures: – $3.456 trillion (2010 est.)

Debt: 1.2 Trillion (2010)

Why do we study such things?