Topic 1.1 Scarcity

needs

the absolute necessities of life (air, food, water, clothing, shelter)

wants

things that are desirable but not necessary for existence

scarcity

the gap between unlimited wants and limited resources

• requires people to make choices about how to use resources to satisfy basic needs + as many wants

economics

the study of how people and societies use limited resources to satisfy their unlimited wants (the study of scarcity & choice)

microeconomics

the study of the effects of economic forces on individual parts of the economy, such as businesses, workers, or households

macroeconomics

the study of the impact of changes to the economy as a whole rather than on an individual part

goods

tangible items of value, things that one can see or touch

• ex: cars, medicines, textbooks

services

intangible things that have value; can neither be seen nor touched

• ex: haircuts, medical care, education

consumers

people who buy goods and services for personal use

consumption

the act of buying goods and services

economic resources

a.k.a factors of production, things that go into the making of goods and services

• natural resources, human resources & capital resources (land, labor, capital, and entrepreneurship)

producers

the people and institutions that make and offer goods and services

• combines factors of production to create their products as efficiently as possible

natural resources

the raw materials that exist on the earth and in the air that humans can use to make goods (referred to as land)

• ex: soil, minerals, animals, trees, sunshine

human resources

the people whose efforts and skills go into the production of goods and services (referred to as labor & the workforce)

• goods and services cannot be produced w/o labor

• influences production of goods and services through both the size & productivity of the workforce

capital resources

the machines, tools, and buildings used in the production of goods and services (referred to as capital goods or capital)

depreciation

the decline in the value of capital goods

entrepreneurship

the process of bringing together the three factors of production (natural, human, and capital resources)

entrepreneur

an individual who organizes a business and invests time and money in hopes of earning a profit