Scarcity, Economic Resources and Systems

Nature of Business and Economic Foundations

Lesson 1: Scarcity, Economic Resources and Systems

Learning Goals

• Understand what scarcity is and its impact on consumer behavior.
• Identify the economic resources needed to run a business.
• Describe various economic systems.

Scarcity

• Scarcity is an economic term that describes the gap between limited resources and limitless wants.
• The imbalance between unlimited wants and limited resources leads to scarcity.
  • Unlimited Wants
  • Limits Resources
• Scarcity necessitates choices about:
  • What to produce.
  • How to produce.
  • For whom to produce.

Economic Resources

• Economic Resources/Factors of Production are the means through which goods and services are made available to consumers.
• Deals with the selection, production, distribution, and consumption of goods and services in society.

Economic Systems

• Pure Market Economy
  • High Profit Motive
  • Strong Competition
  • No Government Regulation
  • Private ownership
• Pure Socialist Economy
  • Low/no profit motive
  • No Competition
  • Extreme Government Regulation
  • No private ownership
• Mixed Economy
  • Private ownership with some government ownership
  • Examples:
    • Canada
    • France
    • North Korea

Characteristics of Market Based Economy (e.g., Canada)

• Consumers seek products that offer the highest quality for the lowest price.
• Businesses must compete with other businesses to meet the needs and wants of consumers.
• Prices are mainly determined by the forces of supply and demand.
• Business success is measured by profit.

Businesses in Market Based Economies

• Businesses exist to fill a need or a want while making a profit or providing a service to the community.
• Needs:
  • Goods and/or services required for survival.
  • Examples: Food, Water, Heat, Shelter, Clothes
• Wants:
  • Goods and/or services that enhance a person’s life.
  • Examples: TV, Cell phone, Transportation, Clothing – Brand Name, Vacation