grab a textbook and: 1) write down the new vocabulary words for chapter 2 and their definitions. 2)...
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Bellringer Grab a textbook and:
1) write down the new vocabulary words for Chapter 2 and their definitions.
2) pick one word to explain to our classmates
Economic Decision Making
Chapter 2
The fundamental economic problem facing all societies is Scarcity.
Scarcity is the condition that results in society not having enough resources to produce all the things people would like to have.
The Main Problem
Even goods and services are scarce, because the resources we need to produce them are scarce
Needs and Wants A NEED is a basic
requirement for survival!!!◦Food◦Water◦Shelter etc.
A WANT is a way of expressing a need
WANTS satisfy needs WANTS are broader
than NEEDS
Shortages are Temporary, while Scarcity is forever
Shortage Scarcity
Lack of something that is desired
Less of a good or service available than what people are willing to pay at the current price
Shortage lasts until more produced or desire ends
Simply not enough of everything to satisfy all of our wants
Permanent condition
Scarcity and Shortage Handout/Activity
By inputs, outputs and the production equation
Inputs = scarce resources that go into the process
Outputs = goods and services produced by these resources
Production Equation = Land + labor + Capital = Goods and Services *Entrepreneurship?
How Do We Satisfy Economic Wants?
Unlimited WantsLimited
Resources
SCARCITY
CHOICES
WHATTo Produce
HOWTo Produce
FOR WHOMTo Produce
Land◦ “Gifts of Nature”◦ Natural resources not created by human effort
◦ Examples: Deserts Fertile fields Forests Animals, birds Sunshine Climate
◦ Includes both renewable and nonrenewable resources
The Factors of Production
Labor◦ The time and effort people devote to producing
goods and services in exchange for wages◦ Includes both physical and mental labor◦ Human capital = knowledge and skill gained from
education or training◦ Strong correlation between country’s level of
human capital and standard of living
The Factors of Production
Capital◦ Physical capital or capital goods = Tools,
equipment, factories or buildings used in production of goods and services
◦ Financial Capital = money to invest in stocks, bonds, real estate, or businesses to produce future wealth
The Factors of Production
Production Equation
Land
Labor
Capital
Goods & Services
Entrepreneurs◦ Some economists consider Entrepreneurship the
4th factor of production◦ A risk-taker in search of profits◦ Innovative workers who are responsible for
economic change Start new businesses Create new products Innovative use of resources
The 4th Factor of Production?
When the four factors of production (land, capital, labor, entrepreneurship) are present, PRODUCTION, or the process of creating goods and services, can take place
IMPORTANT!!! – Everything we produce requires all four factors
PRODUCTION
Look at the Pictures Below, What Factors Do You See?
Four Factors of Production Handout
Factors of production “I, Pencil” https://
www.youtube.com/watch?v=IYO3tOqDISE
Scarcity, Choices, and Exchange Anyone like Star Wars?
http://www.youtube.com/watch?v=Np-dZSdzymk
EconMovies!
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