1)
2)
Grab a textbook and:
write down the new vocabulary words for
Chapter 2 and their definitions.
pick one word to explain to our classmates
Chapter 2

The fundamental economic problem facing all
societies is Scarcity.
Scarcity is the condition that results in society not
having enough resources to produce all the things
people would like to have.
Even goods and services
are scarce, because the
resources we need to
produce them are scarce

A NEED is a basic
requirement for
survival!!!
◦ Food
◦ Water
◦ Shelter etc.
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A WANT is a way of
expressing a need
WANTS satisfy needs
WANTS are broader
than NEEDS
Shortage
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Lack of something that
is desired
Less of a good or
service available than
what people are willing
to pay at the current
price
Shortage lasts until
more produced or
desire ends
Scarcity

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Simply not enough of
everything to satisfy all
of our wants
Permanent condition
Scarcity and Shortage
Handout/Activity

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By inputs, outputs and the production equation
Inputs = scarce resources that go into the
process
Outputs = goods and services produced by
these resources
Production Equation =
Land + labor + Capital = Goods and Services
*Entrepreneurship?
Unlimited Wants
Limited Resources
SCARCITY
CHOICES
WHAT
To Produce
HOW
To Produce
FOR WHOM
To Produce
 Land
◦ “Gifts of Nature”
◦ Natural resources not created by human effort
◦ Examples:
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Deserts
Fertile fields
Forests
Animals, birds
Sunshine
Climate
◦ Includes both renewable and nonrenewable resources
 Labor
◦ The time and effort people devote to producing
goods and services in exchange for wages
◦ Includes both physical and mental labor
◦ Human capital = knowledge and skill gained from
education or training
◦ Strong correlation between country’s level of
human capital and standard of living
 Capital
◦ Physical capital or capital goods = Tools,
equipment, factories or buildings used in
production of goods and services
◦ Financial Capital = money to invest in stocks,
bonds, real estate, or businesses to produce future
wealth
Land
Labor
Goods &
Services
Capital
 Entrepreneurs
◦ Some economists consider Entrepreneurship the 4th
factor of production
◦ A risk-taker in search of profits
◦ Innovative workers who are responsible for
economic change
 Start new businesses
 Create new products
 Innovative use of resources
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When the four factors of production (land,
capital, labor, entrepreneurship) are present,
PRODUCTION, or the process of creating
goods and services, can take place
IMPORTANT!!! – Everything we produce
requires all four factors
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Factors of production
“I, Pencil”
https://www.youtube.com/watch?v=IYO3tOq
DISE
Scarcity, Choices, and Exchange
Anyone like Star Wars?
http://www.youtube.com/watch?v=NpdZSdzymk