What is Economics? A. What is the Basic Problem in Economics?
What is economics?
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Transcript of What is economics?
WHAT IS ECONOMICS?
S C A R C I TY A
N D TH E F
A C T O R S OF P
R O D U C T I ON
SCARCITY AND CHOICEThe study of economics begins with the idea
that people cannot have everything they need and want.
Need: something like air, food, or shelter that is necessary for survival
Want: an item that we desire but that is not essential to survival
Economics is the study of how people seek to satisfy their needs and wants by making choices.
WHY MUST P
EOPLE
MAKE
SUCH CHOICES?
Goods: are physical objects such as shoes and shirts.
Stores brim with goods.
Services: are actions of activities that one person performs for another.
Examples include haircuts, dental checkups, and tutoring.
SCARCITY
WHAT IS SCARCITY?All of the goods and services we produce
are scarce.Scarcity implies limited quantities of
resources to meet unlimited wants.No one can have an endless supply of
everything, eventually a limit is always reached.
PEOPLE’S NEED
S AND
WANTS ARE UNLIM
ITED…
Which sc
arce r
esou
rces w
ere use
d to prod
uce th
e fruits
and ve
getables
show
n here?
SHORTAGEScarcity is not the same as a
shortage.A shortage occurs when producers will
not or cannot offer goods or services at the current prices.
Shortages can be temporary or long-term.
In contrast, scarcity always exists because our needs and wants are always greater than our resource supply.
THE FA
CTORS OF
PRODUCTIO
N
T H E R E S OU R C E S T H A T A R E U S E D T O M
A K E A L L GO
O D S A N D
S E R V I C E S
Land is all of the natural resources used to produce goods and services.
Natural resources are materials found in nature.
They include fertile land for farming and products that are in or on the land, such as coal, water, and forests.
LAND
Labor is the effort that a person devotes to a task for which that person is paid.
Examples include the medical aid provided by a doctor and the tightening of a clamp by an assembly line worker. Or the painting of an artist or the repair of a television.
LABOR
CAPITALAny human-made resource that is used
to produce other goods and services
Can you think of any examples of capital?
Human-made objects used to create other goods and services.
Physical capital is an important factor because it can save people and companies a great deal of time and money.
PHYSICAL CAPITAL
BENEFITS OF PHYSICAL CAPITAL
1.Extra time2.More knowledge3.More productivity
Human capital is the knowledge and skills a worker gains through education and experience.
An economy requires both physical and human capital to produce goods and services.
HUMAN CAPITAL
IF LAND, LA
BOR, AND CAPIT
AL ARE
THE ES
SENTIA
L INGRED
IENTS FO
R
CREATING ALL
GOODS AND
SERVICES, W
HO PULLS
THESE
RESOURCES TOGETH
ER?
? ? ? ? ? ?
ENTREPRENEURSEntrepreneurs are ambitious leaders who
decide how to combine land, labor, and capital resources to create new goods and services.
They are the individuals who take risks to develop original ideas, start businesses, create new industries, and fuel economic growth.
ENTREPRENEURS
SCARCE RESOURCESEconomists say that all goods and
services are scarce because the land, labor, and capital used to create them are scarce.
Examples….