Unit 1.1: Scarcity

Economics: The study of scarcity and how scarce resources are allocated among unlimited needs, wants, and desires.

Resources < Wants

Scarcity: Individuals and societies are forced to make choices because resources are scarce and wants are unlimited.

• Leads to trade-offs

Abundance: Unlimited resources and no need for trade-offs. Opposite of scarcity.

Economic Resources: Something used to produce something else, that are by definition both LIMITED and WANTED.

Factors of Production:

• Land: Natural Resources, Payment: Rent

• Labor: Workers, Payment: Wages

• Capital: Physical Capital, Human Capital, Financial Capital, Payment: Interest

• Entrepreneurship: Combining resources to satisfy wants, needs, and desires, requires risk taking and decision making, Payment: Profit