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Chapter 1 Section 1: Scarcity & The Factors of Production

Scarcity

  • Wealthy countries dont understand the idea of Scarcity
  • Goods: are physical objects such as shoes and shirts
  • Services: are actions or activities that one person performs for another
  • All of the goods and services we produce are scarce
  • Scarcity is not the same as shortage
  • Shortage occurs when producers will not or cannot offer goods or services at the current price
  • Shortages can be short or long-term
  • Unlike scarcity always exists because our needes and wants are always greater than our resource supply

Labor

Entrepreneurs

Labor is the effort that a person devotes to a task for which that person is paid.

It includes the medical aid provided by a doctor and the tightening of a clamp by an assembly line worker.

"Ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services"

  • Take risks to make original ideas
  • Start businesses
  • Create new industries
  • Fuel economic growth

Scarcity and Choice

Land

  • People can not have everything that they need or want.
  • A need: required for survival (air, food, and shelter)
  • A want: not necessary for survival

  • Although people's wants and needs are unlimited, the resources to satisfy these wants and needs are limited.

  • People must consider their options and decide which choice will satisfy their needs best.

Economists call the resources that are used to make all goods and services the facots of production.

Economists use the term land to refer to all natural resources used to produc goods and services.

Scarce Resources

  • All goods and services are scarce because the land, labor, and capital used to create them are scarce
  • All economic resources used to create something are scarce

Ex: Land and labor available to grow potatoes to make french fries are limited.

Physical capital is limited to create the french fries.

Thank You!

Capital

Any human-made resource that is used to produce other goods and services.

  • Physical Capital
  • Human Capital

Physical Capital

Human Capital

The knowledge and skills a worker gains through education and experience.

Is the factor of production because it can save people and companies a great deal of time an money.

Ex; Suppose you live in a house hold of 6 and it takes you 21hrs a week to wash dishes, but with a dishwasher you can do all that in just 5 1/4 hrs having more time for yourselves.

Typical benefits of Physical Capital

  • Extra time
  • more knowledge
  • more productivity

The ability to perform labor so as to perform economic value. People can invest in themselves as well.

Economy requires both Physical and Human Capital to produce goods and services.

  • Doctors use tools to provide service
  • Assembly Line workers use equipment skills to produce good.

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