1. Scarcity and the Science of Economics
“We witness scarcity with each year’s “hot” new product.”

2. Fundamental Economic Problem
 Scarcity: Condition where unlimited human wants
face limited resources.
 Effects almost every decision we make.

3.  The study of how people
try to satisfy wants with
scarce resources.
Economics is about scarce resources,
consumption and production. How
many "economic elements" can you
identify in the picture above?

4.  Need: Required for
survival.
•Want: Desired for satisfaction.

5.  Because resources are
limited, virtually
everything we do has a
cost.
 Someone has to pay for
production
 “TINSTAAFL”
Why do you think scarcity is
an issue with the rich as
well as the poor?

6.  What To Produce: A society must choose based on
its needs.
How To Produce: Society must choose based on its
resources.
 For Whom to Produce: Society must choose based
on its population and other available markets.

7.  Land: Limited natural resources not
created by humans (climate, fresh
water, vegetation, minerals,
animals)
 Capital: Means by which something
is produced (money, tools,
equipment, machinery, and
factories).

8.  Labor: Workers who apply their
efforts, abilities, and skills to
production.
 Entrepreneur: Risk-takers who
combine the land, labor, and capital
into new products.

9.  When all the factors of production are present,
PRODUCTION, or the process of creating goods and
services, takes place.

10.  Economists offer an explanation of the economy and
its activities to the society’s population.
 Prediction: We want to know what’s around the
corner to better prepare ourselves for the unknown.
 Will prices rise or fall?
 Will income increase or decrease?
 Economics is a social science because it looks at the
decisions people make and how they react to those
decisions.

11. Basic Economic Concepts
“20% of the world’s people who live in the wealthiest nations
consume 86% of the world’s goods and services. The 20% who
live in the poorest nations consume only 1.3%”

12.  Goods: Item that is economically useful or satisfies an
economic want.
 Consumer good: Intended for final use by individuals
 Capital goods: Manufactured goods which are used to
produce other goods and services. Ex.?
 Durable goods: Any product that lasts longer than 3
years when used on a regular basis. Ex?
 Nondurable goods: Any product that lasts less than 3
years when used on a regular basis. Ex?

13.  Services:Work that is
performed for someone and
intangible.
 Consumers: A Person who
uses goods and services to
satisfy wants and needs.
 Why do you think the U.S.
has been described as a
“society of consumption”?

14.  Value: A worth that can be expressed in dollars and
cents.
 Scarcity by itself is not enough to create value.
For something to have value, it must also have
utility.

15.  Utility: Provide satisfaction, which varies with the
needs and wants of each person.

16.  The accumulation of goods that are tangible, scarce,
useful, and transferable from one person to another.
 A nation’s wealth is comprised of all items, including
natural resources, factories, etc.
 Does not include services!!

17. The Market
 Factor Markets
 Individual’s earned income
 Focus on the four factors of
production: land, labor,
capital, entrepreneurship
 Product Markets
 Individual’s spending place
 Focus on goods and
services

18. Circular Flow Chart

19. Productivity
 Measure of the amount
of output produced by
a given amount of input
within a certain time
 Productivity increases
with efficient use of
scarce resources.

20. Economic Growth: Depends on high
productivity
 An economy’s productivity may be
affected by…

21. Economic Interdependence
 We rely on others, and others rely on us, to provide
the goods and services that we consume.

22. Opportunity Cost
 The cost of the next best alternative among a person’s
choices.
 The cost may be the money, time or resources a
person gives up, or sacrifices, to make his/her final
choice.
Discussion Question:
What are some important economic decisions you will be
facing within the next 5 weeks? 5 months? One year?
Five years?

23. Production Possibilities continued
 Opportunity Costs: Expressed in terms of trade-offs,
or in terms of things given up to get something else
 Economic Growth: Any increase in resources and/or
productivity causes the production possibilities
frontier to move outward

24.  Build simple models to analyze or describe actual economic
situations.
 Employ Cost-Benefit Analysis: Compare the cost of an
action to the benefits received (Ex. ?)
 Baby Steps: Make decisions by taking small, incremental
steps toward the final goal

25.  Studying economics will help us know how the
economy works on a daily basis.
 Helps us understand the Free Enterprise economy
where consumers and privately owned businesses, not
the government, make a majority of the economic
decisions.

26.  Helps us become better decision-makers, both in our
personal and professional lives AND at the voting
booth!!

27.  Every time a choice is made,
something is given up!
 Rational choice is taking
the things with greater value
and giving up those with
lesser value
 On an individual level, the
choices are not so difficult…
 On the societal level, the
choices may not be so easy to
make…