Scarcity and the Factors Scarcity and the Factors of Productionof Production

ObjectivesObjectives

Identify the economic roles in society.Identify the economic roles in society. Identify land, labor, and capital as the Identify land, labor, and capital as the

three factors of production (resources), three factors of production (resources), and identify the two types of capital.and identify the two types of capital.

Explain why scarcity and choice are basic Explain why scarcity and choice are basic problems of economics.problems of economics.

Explain how to deal with scarcity.Explain how to deal with scarcity. Identify the four economic questions that Identify the four economic questions that

nations ask. nations ask.

The Economic RolesThe Economic Roles(and their examples)(and their examples)

The Consumer: That’s you!The Consumer: That’s you! Consumer Goods: The things Consumer Goods: The things

you want for Christmas you want for Christmas (physical objects).(physical objects).

Services: Professional greeters Services: Professional greeters (activities)(activities)

The Producer: They make what The Producer: They make what you buy.you buy.

The Entrepreneur: A person The Entrepreneur: A person who assembles the factors of who assembles the factors of production to create new goods production to create new goods and services.and services.

The Factors of ProductionThe Factors of Production

““The resources that are used to make all The resources that are used to make all goods and services.”goods and services.”

Three Types of Resources:Three Types of Resources: Human (Labor)Human (Labor) CapitalCapital Natural (Land)Natural (Land)

Types of ResourcesTypes of Resources

Human ResourcesHuman Resources

(Labor):(Labor): The people needed to The people needed to

create a consumer create a consumer good or servicegood or service

Physical or MentalPhysical or Mental Examples:Examples:

McDonald’s?McDonald’s? Wal-Mart?Wal-Mart? LHHS?LHHS?

Types of Resources (Cont’d)Types of Resources (Cont’d)Capital Resources:Capital Resources:

Any resource that is used to Any resource that is used to produce other goods and produce other goods and services (two types):services (two types): Physical Capital: Human-made Physical Capital: Human-made

objects used to create other goods objects used to create other goods and servicesand services

Human Capital: Education and Human Capital: Education and knowledgeknowledge

Examples:Examples: Doctor?Doctor? Nike?Nike? In-n-Out?In-n-Out?

Types of Resources (Cont’d)Types of Resources (Cont’d)

Natural Resources:Natural Resources: All materials found in All materials found in

nature to produce the nature to produce the good or servicegood or service

Types of Resources

ScarcityScarcity

What is scarcity?What is scarcity? Needs vs. WantsNeeds vs. Wants Scarcity vs. ShortageScarcity vs. Shortage Why is scarcity Why is scarcity

important?important?

The Causes of ScarcityThe Causes of Scarcity

Poor distribution of resourcesPoor distribution of resources May depend on personal perspectiveMay depend on personal perspective Rapid increase in demandRapid increase in demand

Examples:$3 million for The First Tee$460,752 for hops research $211,509 for olive fruit fly research in Paris, France $196,000 for the renovation of the historic Post Office in Las Vegas$188,000 for the Lobster Institute in Maine$148,950 for the Montana Sheep Institute

How to Deal with ScarcityHow to Deal with Scarcity

Just do without Just do without somethingsomething

Create more Create more resourcesresources

Produce more by Produce more by making better use of making better use of existing resourcesexisting resources

Redistribute and Redistribute and shareshare

The Four Economic Questions The Four Economic Questions Nations AskNations Ask

What What goods and services will be goods and services will be produced?produced? ““Let’s invent and sell disposable underwear.”Let’s invent and sell disposable underwear.”

HowHow will the goods and services be will the goods and services be produced?produced? ““We’ll hire paper-mache experts to design We’ll hire paper-mache experts to design

and make our clothes.”and make our clothes.” WhoWho will get them? will get them?

““Let’s sell this stuff to lazy people who don’t Let’s sell this stuff to lazy people who don’t like to wash their underwear.”like to wash their underwear.”

How muchHow much will be produced for now and will be produced for now and how much for later?how much for later? ““Our company will produce 5,000 disposable Our company will produce 5,000 disposable

underwear outfits that present three types of underwear outfits that present three types of styles.”styles.”