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ECONOMIC WANTS
BUSINESS MANAGEMENT
PAVONE
SATISFYING OUR ECONOMIC WANTS
• Economics – The body of knowledge that relates to producing and
using goods and services that satisfy human wants.
• Economic Wants – The desire for scarce material goods and
services.
• Material goods can be clothing, housing, cars, etc.
• Services can be hair care, medical attention, public
transportation, etc.
• Noneconomic Wants – The desire for nonmaterial things that are
not scarce, such as air, sunshine, friendship and happiness.
UTILITY
• Utility – The ability of a good or service to satisfy a want.
• Producer – Anyone who creates a utility.
• There are four types of utility:
• Form Utility, which is created by changes in the form or shape
of a product to make it useful.
• Place Utility, which is created by having a good or service at
the place where it is wanted or needed.
• Time Utility, which is created when a product or service is
available when it is needed or wanted.
• Possession Utility, which is created when ownership of a good
or service is transferred from one person to another, but may
also occur through renting and borrowing.
FACTORS OF PRODUCTION
• Factors of Production – What a producer uses in creating useful
goods and services; they are:
• Land (natural resources)
• Labor
• Capital goods
• Entrepreneurship
NATURAL RESOURCES
• Natural Resources – Anything provided by nature that affects the
productive ability of a country.
• Example: The United States’ productive ability depends on fertile
soil, minerals, water, timber resources and mild climate.
LABOR
• Labor – The human effort, either mental or physical, that goes into
the production or goods and services.
• Human Capital – The accumulated knowledge and skills of human
beings; the total value of each person’s education and acquired
skills.
• In today’s world, technology and special equipment make physical
effort much less important than mental effort.
CAPITAL GOODS
• Capital Goods – Buildings, tools, machines and other equipment
that are used to produce other goods but do not directly satisfy
human wants.
• Example: A robot on an assembly line is a capital good; it does not
satisfy human wants, but it assembles cars that do satisfy human
wants.
ENTREPRENEURSHIP
• Someone, or a group, must take the risks involved in starting a
business and planning and managing the production of a final
product.
• Entrepreneurship brings together the other three factors.
CAPITAL FORMATION
• Capital Formation – Production of capital goods.
• Consumer Goods and Services – Goods and services that directly
satisfy people’s economic wants.
• When the production of consumer goods and services increases,
the production of capital goods decreases.
• When the production of consumer goods and services decreases,
the production of capital goods increases.
• When productive resources are used for capital formation, it
becomes possible to produce more consumer goods.
• If using resources to produce capital goods, less resources can be
used to produce consumer goods.