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Chapter 1 Section 1: Scarcity & The Factors of Production

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by

Lani Tieu

on 5 November 2014

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Transcript of Chapter 1 Section 1: Scarcity & The Factors of Production

Thank You!
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

Land
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.
Labor
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.
Capital
Any human-made resource that is used to produce other goods and services.
Physical Capital
Human Capital
Chapter 1 Section 1: Scarcity & The Factors of Production
Scarcity and Choice
Entrepreneurs
Scarce Resources
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.

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

Full transcript