Scarcity and the Scarcity and the Factors of ProductionFactors of Production

The study of economics The study of economics begins with the idea that begins with the idea that people can’t always have people can’t always have

what they need and want.what they need and want.

Wants: Wants: Simply the desires of Simply the desires of citizens.citizens.

Needs:Needs: These are basic These are basic

requirements for survival like food requirements for survival like food and water and shelter. and water and shelter.

EconomicsEconomics

is the study of how people seek to is the study of how people seek to satisfy their needs and wants by satisfy their needs and wants by making choices. making choices.

To understand economics fully, To understand economics fully, economists must study each group economists must study each group that makes choices – individuals, that makes choices – individuals, groups, and through governments. groups, and through governments.

Goods:Goods: tangible commodities. These tangible commodities. These are bought, sold, traded and are bought, sold, traded and produced. produced.

GoodsGoods

Consumer Goods:Consumer Goods: Goods that are intended Goods that are intended for final use by the consumer.for final use by the consumer.

Capital Goods:Capital Goods: Items used in the creation of Items used in the creation of other goods. factory machinery, trucks, etc.other goods. factory machinery, trucks, etc.

Durable Goods:Durable Goods: Any good that lasts more Any good that lasts more than three years when used on a regular basis.than three years when used on a regular basis.

Non Durable Goods:Non Durable Goods: Any item that lasts less Any item that lasts less than 3 years when used on a regular basis. than 3 years when used on a regular basis.

Services:Services: Services are actions or Services are actions or activities that one person performs activities that one person performs for another. Examples: for another. Examples:

So what is scarcity?So what is scarcity?

Scarcity:Scarcity: Limited quantity of Limited quantity of resources to meet unlimited wants. resources to meet unlimited wants.

Examples:Examples:

Scarcity is the fundamental economic Scarcity is the fundamental economic problem facing ALL societies. problem facing ALL societies. Essentially it is how to satisfy Essentially it is how to satisfy unlimited wants with limited unlimited wants with limited resources. This is the issue that resources. This is the issue that plagues all governments and plagues all governments and peoples. peoples.

Factors of Production Factors of Production (Factor Resources)(Factor Resources)

these are those elements that a these are those elements that a nations has at its disposal to deal nations has at its disposal to deal with the issue of scarcity. How with the issue of scarcity. How efficiently these are used determines efficiently these are used determines the measure of success a nation has. the measure of success a nation has.

They are: They are:

LandLand - natural resources, etc. What - natural resources, etc. What are natural resources?are natural resources?

LaborLabor - the work force; size, - the work force; size, education, quality, work ethic. education, quality, work ethic.

CapitalCapital – Any man-made resource – Any man-made resource that is used to produce other goods that is used to produce other goods and services.and services.

CapitalCapital

Physical CapitalPhysical Capital: Human made : Human made physical objects.physical objects.

Human Capital:Human Capital: The knowledge The knowledge and skills a worker gains through and skills a worker gains through education and experience. education and experience.

Who pulls everything to make Who pulls everything to make and provide goods and and provide goods and

services? services? EntrepreneursEntrepreneurs: Ambitious leaders who : Ambitious leaders who

decide how to combine land, labor and decide how to combine land, labor and capital resources to create new goods capital resources to create new goods and services. Inventive and risk taking and services. Inventive and risk taking spirit. spirit.

EntrepreneurshipEntrepreneurship

It is estimated that 85% of small It is estimated that 85% of small businesses go bankrupt during the businesses go bankrupt during the first five years. And 85% of those first five years. And 85% of those that survive go bankrupt in the next that survive go bankrupt in the next five years. five years.

There is a great scarcity of good There is a great scarcity of good management talent in the world. management talent in the world.