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Agribusiness Library

Lesson: 060011 The Basics of Economics

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Objectives

1.Define scarcity, and identify limited resources for an individual and country.

2.Define economics, and examine the major components of economics.

3.Distinguish between microeconomics and macroeconomics.

4.Describe the resources needed in agribusiness, and examine the role of natural resources in agricultural economics.

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Terms

allocates capital economics free resources labor land macroeconomics management microeconomics

needs products resources scarcity services wants

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What does it mean if a resource is scarce? What resources are limited?

Scarcity is a situation where resources are lacking. In the simplest terms, scarcity recognizes that the supply of goods, time, and resources on Earth are limited while human wants are unlimited.A. Not all resources are scarce. The resources that are readily available are called free resources.

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What does it mean if a resource is scarce? What resources are limited?

B. People are limited in the resources they can acquire based on their budgets. Individuals can only use their wealth (savings) and their income to acquire goods and services.

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What does it mean if a resource is scarce? What resources are limited?

C. Countries may also have scarce resources. The

earth has only so much land, water, and other natural resources available to be converted into

goods. For example, the United States has

smaller supplies of crude oil than countries in the Middle East.

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What problems does the field of economics consider? What are the major components of economics?

Economics is the science that deals with the production, distribution, and consumption of wealth. (Three questions are commonly asked in reference to economics: What goods should be produced, and how much of each? How should the goods be produced? Who should get what?) There are three different components of economics: scarcity, types of resources, and wants and needs.

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What problems does the field of economics consider? What are the major components of economics?

A. Scarcity is a situation where resources are lacking. Economics studies the way in which a society allocates (distributes) its scarce resources.

1. Economics wants to know which individuals or groups receive which goods and services.

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What problems does the field of economics consider? What are the major components of economics?

A. Scarcity (cont’d)2. Not all resources are scarce. Readily available

resources are called free resources.3. Shortage and scarcity are not the same.

a. Scarcity exists as a result of limitations of a resource. b. A shortage is a temporary situation.

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What problems does the field of economics consider? What are the major components of economics?

B. Resources are items that are ready to use at any time. Some resources are considered factors of production, such as land, labor, capital, and management. These resources are used to make products and to provide services.

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What problems does the field of economics consider? What are the major components of economics?

B. Resources (cont’d)1. Products are the goods produced to meet the

needs of consumers. Food, clothing, electronics, automobiles, and buildings are products.

2. Services are activities provided to consumers for a fee. Opening a checking account for someone, stacking bales of hay in a haymow, or driving someone across town in a taxi are services.

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What problems does the field of economics consider? What are the major components of economics?

C. Needs and wants1. Needs are things necessary for daily living. Food

and shelter are examples of needs.2. Wants are things that are not necessary for

daily living. Generally, the more people get, the more they want.

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What is the difference between microeconomics and macroeconomics?Economics is often broken into two major branches: microeconomics and macroeconomics.A. Microeconomics considers the interactions of

individuals and firms in a single market, understanding scarcity and

government regulations exist.

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What is the difference between microeconomics and macroeconomics?1. Microeconomics recognizes that individuals and firms can specialize in the production of a particular good or service because they are comparatively better at it than others.2. Individuals who specialize can trade their goods and services with other individuals for different goods and services.

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What is the difference between microeconomics and macroeconomics?B. Macroeconomics considers the economy as a whole and seeks to understand the broad concepts that tend to influence most or all markets.

1. Macroeconomics focuses on understanding what causes a national economy of many markets to grow or shrink together.

2. Macroeconomics considers the impact of items, such as unemployment, interest rates, and inflation.

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What resources are needed for an agricultural business? What is the role of natural resources in agricultural economics?

A resource is an item used to produce a product or a service.A. Land includes everything in nature used in production.

1. Soil2. Minerals3. Wildlife4. Trees5. Rivers and other water sources6. Air

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What resources are needed for an agricultural business? What is the role of natural resources in agricultural economics?

B. Capital includes human-made items used in production.

1. Cash2. Equipment3. Buildings4. Supplies

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What resources are needed for an agricultural business? What is the role of natural resources in agricultural economics?

C. Labor is the physical energy supplied by humans.

D. Management is the decision-making function of the business.

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Review

Name an example of a scarce resource in the US.

What is the difference between a shortage and a scarcity.

What are three different components of economics?

What is the difference between microeconomics and macroeconomics?