Scarcity<br />“Limited quantities of resources to meet unlimited wants.”<br />What’s that mean?<br />
Scarcity<br />Your wants are pretty much unlimited. <br />Even if yours personally aren’t, once you add up everybody in the population, the collective wants are unlimited.<br />All resources, goods, and services are limited, however.<br />This means it’s impossible for all the wants to be met.<br />
Scarcity<br />Economics, then, tries to solve the problem of scarcity.<br />This doesn’t mean to make unlimited stuff, but figuring how to distribute scarce, limited stuff in the best way to meet wants.<br />It also wants to see how people satisfy needs and wants by the choices they make.<br />Why X and not Y? Why McDonald’s? Why did banks buy mortgage-backed securities? Why TXU and not Gexa? Why Crocs?<br />Seriously… why Crocs?<br />
Goods and Services<br />Goods<br />Stuff.<br />Services<br />Things people do for others.<br />
Shortage<br />When there isn’t enough stuff.<br />Not enough of a product can be supplied or it won’t be supplied. At least not at current prices.<br />If prices go up, it may become profitable for somebody to provide the good or service and that will eliminate the shortage.<br />
Factors of Production<br />Land, Labor, Capital<br />These have specific meanings in economics.<br />
Land<br />All natural resources used to produce goods and services.<br />
Capital<br />Human-made resources used to produce stuff or provide services.<br />Note this is different from land, which is natural resources.<br />Two types: Physical and Human.<br />
Physical Capital<br />Non-human assets used by real humans in production.<br />Whoa! Check out that physical capital!!!<br />
Physical Capital<br />This includes things like buildings, factories, equipment, computers, paper, copy machines, etc.<br />Typically, this increases productivity since you can do more of X and more time is freed up to pursue Y.<br />Not so much.<br />
Human Capital<br />The education, experience, abilities, and knowledge of an employee.<br />These have economic value.<br />Not all labor is equal in value.<br />
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