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1.1 SCARCITY AND THEFACTORS OF PRODUCTION

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ECONOMICSMR. HOOD13 JANUARY 2014

1.1 SCARCITY AND THEFACTORS OF PRODUCTION

ECONOMICSMR. HOOD`S NOTES13 JANUARY 2014

SECTION FOCUSPEOPLE, BUSINESSES, AND GOVERNMENT MUST CHOOSE AMONG LIMITED OR SCARCE RESOURCES. ECONOMICS DESCRIBES HOW PEOPLE SEEK TO SATISFY THEIR NEEDS AND WANTS BY CHOOSING AMONG MANY ALTERNATIVES.

INTRODUCTION

ECONOMICS IS PART OF OUR EVERYDAY

LIFE

AT HOME

IN BUSINESS

AND IN GOVERNMENT

OBJECTIVE 1EXPLAIN WHY

SCARCITY AND CHOICE ARE

BASIC PROBLEMS OF ECONOMICS

CHOICE

PEOPLE CANNOT HAVE EVERYTHING YOU

NEED + WANT

THEY MUST CONSIDER OPTIONS

DECISIONS MUST BE MADE

NEEDS ARE ESSENTIAL FOR

SURVIVAL

EG. FOOD, SHELTER, CLOTHES

WANTS NOT ESSENTIAL FOR

SURVIVAL

EG. CAR, IPOD, TV

ECONOMICS IS ABOUT

WHICH CHOICE FILL NEEDS BEST

ECONOMICS IS HOW PEOPLE SATISFY THEIR NEEDS + WANTS BY

MAKING CHOICES

THE REASON IS SCARCITY

SCARCITY

GOODS ARE PHYSICAL OBJECTS

EG. SHOES AND SHIRTS

SERVICES ARE ACTIONS OR

ACTIVITIES

EG. HAIRCUTS, DENTAL CHECKUP OR

TUTORING

SCARCITY EXISTS AT ALL TIMES

LIMITED QUANTITIES

UNLIMITED WANTS

NO ENDLESS SUPPLY

SOONER OR LATER A LIMIT IS ALWAYS

REACHED

SCARCITY IS NOT THE SAME AS

SHORTAGES

SHORTAGES ARE WHEN GOODS + SERVICES ARE

UNAVAILABLE

EXCESS DEMAND LEADS TO

SHORTAGES

SHORTAGES CAN BE TEMPORARY OR LONG-

TERM

TEMPORARY: CHRISTMAS

LONG TERM: WAR/DROUGHT

OBJECTIVE 2IDENTIFY LAND, LABOR, AND

CAPITAL AS THE THREE FACTORS OF PRODUCTION,

AND IDENTIFY THE TWO TYPES OF CAPITAL

RESOURCES USED TO MAKE GOODS AND

SERVICES

CALLED FACTORS OF PRODUCTION

1 - LAND

NATURAL RESOURCES USED TO PRODUCE

GOODS

2 - LABOR

THE WORKERS

3 - CAPITALHUMAN-MADE RESOURCES USED TO PRODUCE GOODS

TWO TYPES OF CAPITAL

PHYSICAL + HUMAN

1 - PHYSICALBUILDING, TOOLS,

MACHINES

2 - HUMAN

KNOWLEDGE AND SKILLS

OBJECTIVE 3EXPLAIN THE ROLE

OF ENTREPRENEURS

WHO PULLS

RESOURCES TOGETHER?

THE ANSWER IS ENTREPRENEURS

AMBITIOUS LEADERS

COMBINE FACTORS OF PRODUCTION

DEVELOP ORIGINAL IDEAS

START BUSINESSES

NEW INDUSTRIES

FUEL ECONOMIC GROWTH

I N T E R N A T I O N A L, NATIONAL, OR

LOCAL

OBJECTIVE 4EXPLAIN WHY

ECONOMISTS SAY ALL RESOURCES ARE

SCARCE

ALL RESOURCES ARE SCARCE

BECAUSE…

FACTORS OF PRODUCTION ARE

SCARCE

EG. FRENCH FRIES

FIRST FIELD GROWS

POTATOS…

…POTATO FIELD IRRIGATED WITH

WATER…

…POTATOS PROTECTED

BY FERTILIZERS…

…POTATOES PICKED AND

TRANSPORTED…

…CUT AND FRIED IN OIL…

…SOLD AND EATEN WITH SALT +

KETCHUP

SUPPLIES OF LAND, LABOR + CAPITAL SCARCE