What is Economics? Economics can be defined as the Social Science concerned with the Problem of administering or using Scarce Resources so as to attain the greatest or maximum fulfillment of society’s Unlimited Wants. Factors of Production Natural Resources: land, minerals, water, forests, etc.; Labor: both physical and mental; Physical Capital: machines, tools, buildings, trucks, etc.; Human Capital: knowledge, education; know how; and Entrepreneurship: the ability to organize a production process and take risks. Production Possibilities Frontiers (PPF) PPF shows all the combinations of two goods that the full-employment use of a society’s resources can produce in a period of time (using the best available technology). Production Possibilities FOOD MACHINES A B C D E F 15 14 12 9 5 0 0 1 2 3 4 5 Food A B C D E PPF F 0 Machines Decision Makers Households: the principal owners of factors of production; Business Firms: the principal users of factors of production; and Central Authorities: the federal, state, and local governments and their agencies. Types of Economic Problems What goods and services are being produced and in what quantities? By what methods are goods and services produced? How is the supply of goods and services allocated among the members of the society? Are the society’s resources being fully employed, or are some lying idle? Is purchasing power being eroded by inflation? Is the economy’s capacity to produce goods and services growing over time?