Economizing Problem
“Scarcity”
Scarcity - When There Is Not Enough
For Everyone – Someone Suffers
The Economizing Problem is that;
SOCIETY HAS VIRTUALLY UNLIMITED WANTS...
BUT LIMITED OR SCARCE RESOURCES!
The economizing problem is one of
deciding how to make the best use of
limited resources to satisfy virtually
unlimited wants.
All goods and services
Require resources to produce.
So we call these resources the
factors of production.
Food
Clothing
Shelter
The Four Factors of Production
.
[natural resources] – Nature’s items.
A. In the earth - coal, oil, water, fossil fuels
B. On the earth – vegetation and water
C. In the atmosphere – sun, wind, and rain
1. Land
Land is the starting point of all production.”
“Stuff” from which everything is made.
Sun
Fossil fuels
Wind
Water
2. Labor [human resources]- the “brain-power” and
“muscle-power” of human beings.
A. Physical – pro basketball players & lumberjacks
B. Intellectual – ministers, doctors & lawyers
Labor is the most important resource accounting for
70% of input cost in the U.S.
3. Capital Resources – all “man-made inputs” used to produce
consumer products (machinery, physical plants, & tools).
A. Capital goods – goods [machinery, buildings, & tools]
used to produce other goods. [crane, Ford plant, hammer]
Capital goods represent future wealth, or economic growth
B. Consumer goods – products meant for “immediate
consumption”. Consumer goods represent current wealth
or standard of living. A product can be a both a consumer
& a capital good, depending on its use (using your
personal car to delivers pizzas.)
“Financial Capital” = money, stocks, bonds. These are not
economic resources because they produce nothing.
– the drive to introduce a
new product or start the new business.
Entrepreneurs combine land, labor, & capital
to produce products.
They are the “Sparkplugs” of economic
growth. Their job is to innovate.
4. Entrepreneurship
These resources are not free. They require
payment to use.
Property Resources
LAND
CAPITAL
RENTAL INCOME
INTEREST INCOME
HUMAN RESOURCES
LABOR
ENTREPRENEUR
WAGES
PROFIT & LOSS
The End