What is EconomicsChapter 1 Section 1

Scarcity & Factors of Productionhttp://www.reffonomics.com/TRB/chapter1/whatiseconomics1.swf

What is Economics

Objectives: 1. Explain why scarcity and choice are basic

problems of economics. 2. Identify land, labor, and capital as the

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

3. Explain the role of entrepreneurs. 4. Explain why economists say all resources

are scarce.

What is Economics

Look at three scenarios:1. Members of a household work together to

do the laundry, purchase groceries, make meals, earn money, decide how to spend their money, and decide who gets to hold the TV remote.

What is Economics

Look at three scenarios:2. The leaders of a large corporation sit at a

table for their monthly meeting. They discuss whether to add a new product to their product line and advertising options on television and the Internet.

What is Economics

Look at three scenarios:3. Senators in the US Congress gather to

debate the important issues of the day: How can we ensure that people are well fed and

have access to health care. What limits should the government place on

businesses and international trade? Who gets to control the Internet”

What is Economics

Economists look at the decisions made in each scenario and study those decisions in great detail.

What is Economics

Scarcity & Choice:The study of economics begins with the idea

that people cannot have everything they need and want.

A need is something like air, food, shelter (basic items for survival).

A want is an item that we desire but are not essential for survival.

What is Economics

You need a way to school.

Walking Mom drives you

A bike Ride the bus

What is Economics

Instead you want this type of ride

A Hummer H2 A Lamborghini An Escalade

A stretch Limousine

What is Economics

Scarcity & Choice:Because people cannot have everything they

need or want, they must consider their options and decide which choice will fill their needs the best.

What is Economics

As a student you have decided to use your time by coming to school instead of staying in bed and getting a few more hours of sleep.

What is Economics

Scarcity & Choice:Economics is the study of how people seek to

satisfy their needs and wants by making choices.

Why must people make choices????

What is EconomicsGood – physical objects such as shoes &

shirts.

What is Economics

Services – are actions or activities that one person performs for another. i.e.

What is Economics Scarcity & Choice:

Because of Scarcity:We in America have a hard time

understanding scarcity since our store shelves are filled with all kinds of goods.

What is Economics

Scarcity: It exists in all places, at all times. Defining Scarcity – implies limited quantities of resources

to meet unlimited wants. Scarcity is not the same thing as a shortage. A shortage occurs when producers will not or cannot offer

goods or services at the current price. They are temporary- sometimes can be long-term.

What is Economics Factors of Production:

Resources that are used to make goods and services. 1. Land

All natural resources used to produce goods and services. Include fertile land, coal, water, forests, cattle, and etc.

What is Economics2. Labor

The effort that a person devotes to a task for which that person is paid.

What is Economics3. Capital

Any human-made object used to produce other goods and services.

What is Economics

2 Types of Capital: Physical – human-made objects used to

create other goods and services. i.e. buildings, tools, equipment, and etc. An oven in a bakery; a sewing machine in a clothing

factory; bulldozer to clear land for homes Human Capital – the knowledge and skills a

worker gains through education and experience.

A country needs physical and human capital to produce goods and services.

What is Economics Factors of Production:

4. Entrepreneurship/Entrepreneurs The leaders who combine the land, labor,

and capital together to make a good or service.

They are the risk-takers by starting new businesses, develop new ideas, create new industries, and fuel economic growth.

Bill Gates – Microsoft Henry Ford – Ford Motor Company

Assembly Line, revolutionized production

What is Economics

Scarce Resources:Economists say that all goods and services

are scarce because the land, labor, and capital used to create them are scarce.

Any good that we can talk about would be considered to be scarce since the land, labor, and capital to produce that good is scarce.

What is Economics

REVIEW:1. What is the difference between a good and a service?

2. Why is the idea of scarcity a starting point for

thinking economically.

3. How is scarcity different from shortage?

4. List and describe the four factors of production.

5. What special advantages does physical capital offer?

6. What role do entrepreneurs play in the economy?

What is Economics1. Good – a physical object.

Service – action or activities perform by someone.

2. Economics seeks to solve the scarcity problem, which exits

because resources are limited whereas needs and wants are

unlimited.

3. Scarcity always exits because goods and services are

produced from limited resources. Shortages can be temporary

or long-term and occur only when producers will not or cannot

offer goods and services at current prices.

4. Land includes any natural resources used to produce goods

and services, such as fertile soil or coal. Labor is the effort that

one person exerts for another and for which the first person is

paid. Capital is any human-made resource used to produce

goods and services.

What is Economics

5. Physical capital provides extra time, increased knowledge,

and/or greater productivity.

6. Entrepreneurs decide how to combine the factors of

production to create new goods and services.