Understanding Scarcity and Choice in Economics
Learn about economic resources, factors of production, scarcity, choice, and opportunity cost in Chapter 31. Explore how individuals and organizations use resources to create goods and services while making decisions to satisfy needs and wants efficiently.
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Presentation Transcript
Chapter 31 Learning intentions In this chapter you will learn to: Explain what economic resources are Identify and explain each of the factors of production Describe how individuals and organisations use each of the factors of production to create goods, services and wealth List the rewards associated with each factor of production Explain how scarcity, choice and opportunity cost impact on the production of goods and services. Textbook page reference: 364
Chapter 31 What is economics? Economics is a social science that studies how people with limited resources make choices in order to satisfy their needs and wants. These people include individuals, organisations and governments. Textbook page reference: 365
Chapter 31 What is economics? Economic resources are the factors or inputs used to produce and distribute goods, services and wealth. Textbook page reference: 365
Chapter 31 Resources 1. Resources are scarce (limited in supply) 2. Scarce resources must be used efficiently in order to satisfy needs and wants. Textbook page reference: 365
Chapter 31 Needs, wants and choices A need is something we simply can t do without. It is essential for our survival or plays a very important part in our daily lives, for example food and clothing. Textbook page reference: 365
Chapter 31 Needs, wants and choices A want is something that we would really like to have. It may improve our quality of life but it is not essential, for example a new mobile phone or a holiday. Textbook page reference: 365
Chapter 31 Needs, wants and choices Since we don t have enough resources to satisfy all of our needs and wants, we have to make choices about how best to use the resources available to us. Textbook page reference: 366
Chapter 31 Needs, wants and choices Everything we buy or consume has a financial cost and an opportunity cost. The financial cost is the price of the item we choose to buy. Textbook page reference: 366
Chapter 31 Needs, wants and choices The opportunity cost is all the other things we could have done with our resources, but can t do now due to lack of resources. Textbook page reference: 366
Chapter 31 Needs, wants and choices To make the best use of resources, we should try to make rational choices. These offer the greatest benefit to the greatest number of people. A rational choice is one where the expected gains outweigh the expected losses. Textbook page reference: 367
Chapter 31 Needs, wants and choices When choosing between two or more alternatives, we will choose the one that will provide us with the greatest benefit or satisfaction from our limited resources. The economic term for this is utility. Textbook page reference: 367
Chapter 31 Factors of production The factors of production are the economic resources needed to produce the goods and services we need and want. Textbook page reference: 368
Chapter 31 Factors of production Textbook page reference: 368
Chapter 31 Land Anything provided by nature and used to produce goods and services. The reward for the use of land is rent. Textbook page reference: 369
Chapter 31 Labour The people involved in producing a good or service. The reward for labour is wages. Textbook page reference: 369
Chapter 31 Capital Physical items made by people and used in the production of goods or services. The reward for the use of capital is interest. Textbook page reference: 369
Chapter 31 Enterprise Enterprise is any attempt to start or do something new. Enterprise brings together land, labour and capital to produce a product or a service. The reward for enterprise is profit. Textbook page reference: 369
Chapter 31 Scarcity Economic resources have three things in common: They have value They have alternative uses They are scarce or limited in supply. Textbook page reference: 370
Chapter 31 Scarcity Supply is the quantity of a resource that is available at a given time or price. Textbook page reference: 370
Chapter 31 Scarcity As resources are scarce, choices must be made about: What will be produced How it will be produced Where it will be produced Who will receive the goods and services. Textbook page reference: 370
Chapter 31 Recap and review Can you? Explain what economic resources are Identify and explain each of the factors of production Describe how individuals and organisations use each of the factors of production to create goods, services and wealth List the rewards associated with each factor of production Explain how scarcity, choice and opportunity cost impact on the production of goods and services.
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