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START PREP
1.1 SCARCITY AND THEFACTORS OF PRODUCTION
TEXTBOOK PAGE 3
THEN START READING SECTION
NOTES BEGIN AT 13.35
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