Scarcity and the Science of Economics

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Scarcity and the Science of Economics

• Chapter 1.1

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The Fundamental Economic Problem

• Scarcity is the condition that results from
  society not having enough resources to produce
  all the things people would like to have. (?)
• Economics is the study of how people try to
  satisfy what appears to be seemingly unlimited
  and competing wants through careful use of
  relatively scarce resources.

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So, tell me what you want

• Economists break down economic decisions based on
  wants and needs.
• A need is a basic requirement for survival (i.e.
  food, clothing, shelter).
• A want is a way of expressing a need (i.e. I
  need food I want a soy burger).

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TINSTAAFL

• There is no such thing as a free lunch.
• Is this true? Why or why not?

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Three Basic Questions

• WHAT? Do we produce domestic items (butter) or
  national defense items (guns)? Public housing or
  private mansions?
• HOW? More technology and less workers or vice
  versa? Mass produced or boutique?
• FOR WHOM? Who receives the products (affects
  government policies, etc.)

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Factors of Production

• Resources required to produce goods and services.
• The four (4) Factors of Production are Land,
  Labor, Capital, Entrepreneurship.

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Land

• Land refers to anything not created by humans.
• Farmland, forests, minerals, livestock, sunshine,
  climate, etc.
• Susceptible to scarcity with population increases.

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Labor

• People and their efforts, abilities, and skills.
• Affected by population growth, immigration,
  famine, war, disease, economic trends.

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Capital

• Tools, equipment, machinery, factories used in
  producing goods services (Capital Goods).
• Money used to buy capital goods (Financial
  Capital).
• Capital goods have a dual role because they are
  also products.

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Entrepreneurs

• Risk-takers who combine existing resources into
  new products in search of profit.
• When all four factors are combined, production
  occurs.

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Economics A social science?

• Economics tries to explain the way humans satisfy
  seemingly unlimited and competing wants with
  limited resources.
• Description Gross Domestic Product (GDP) is the
  dollar value of all final goods and services
  produced in a country within one year.
• Unemployment, inflation, international trade,
  labor relations, government spending, taxes, and
  distribution of wealth.

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• Analysis Asking why and how about price, income,
  taxation and desire to work, saving.
• Explanation Common understanding of economic
  functions aids in problem-solving and policy
  development.
• Prediction Aids in decision making by
  speculating on economic trends.
• To tax or not to tax? Sales tax or property tax?
  Which jobs will pay more? Less?

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Economics and Freedom

• Being informed is the duty of all citizens in a
  democratic society.
• You cant make policy (or elect people who will)
  if you dont know what you want.