Study of the choices people make when faced with scarcity scarcity Unlimited wants with limited resources What is scarce ? ANYTHING YOU DO NOT HAVE!!! AGREE OR DISAGREE? Resources are “scarce”. There are not enough. RESOURCES SCARCE Needs vs. Wants survival Water Food Shelter Clothing like or desire Coke Pizza Hut mansion Abercrombie Need or Want? • • • • • • • • Chocolate milk Milk for a newborn baby Hairspray Toothpaste Shelter during winter Car Ipod water 3 Basic Economic Questions 1. What to produce? 2. How to produce? 3. For Whom to produce? Factors of Production • What went into making this? What went into this? Rubber (from Malaysia) machines metal Someone who put all of this together. wood graphite 4 Categories of Productive Resources (Factors of Production) LAND LABOR - Natural, renewable resources - Human resources, people -wood, rubber, graphite, land, animals -MENTAL and PHYSICAL CAPITAL - A produced good used in the prduction of another good -Machines, computers, buildings, etc ENTREPRENUERSHIP -The person or group responsible for putting the other 3 together to produce something Factors of Production 1. Land: includes not only property on which a production plant is built, but all other natural resources. (land, forests, water resources, oil) 2. Labor: is the contribution of human workers to the production process. (school teachers, janitors) Factors of Production 3. Capital: refers to all the structures and equipment involved in the manufacturing process. (machinery storage, transportation) 4. Entrepreneurship: is a specific form of labor. A risk-taker in search of profits who does something new with existing resources. Natural Resources: Human Resources List examples List examples Draw picture to represent Draw picture to represent Think of a product Capital Resources Entrepreneurship List examples List examples Draw picture to represent Draw picture to represent How are scarce resources allocated? • Our economic system allocates resources by price.