Economics- the study of how individuals, institutions, and society make optimal choices under conditions of scarcity."Our science is the theory of a human being's ability to deal with his wants"-Karl Menger, 1883
- Our resources are scarce, our wants are not.
- People have to choose which wants to satisfy (prioritize)
- scarcity necessitates choice necessitates ranking of wants
- or economizing
- That choice is rational (marginal analysis)
NO FREE LUNCH
Productive Resources (resources) fall into three categories:
- Human Resources
- Natural Resources
- Capital Resources
Human Resources
- The broad category of human efforts, both physical and mental, used to produce goods and services
- Most important human resource is labor, the physical and mental effort used to produce goods and services.
- Labor comes from time
- When you sell your time as labor, you earn a wage.
Entrepreneur- person who tries to earn a profit by developing a new product or finding a better way to produce an existing one.
Natural Resources
- “Gifts of nature”- things from the earth used to produce goods and services
- land, forests, minerals, oil, bodies of water, animals
- divided into renewable resources and exhaustible (non-renewable) resources
Exhaustible resource- a set amount; does not renew itself or takes a long time to renew
Capital Resources
- All of the human creations used to produce goods and services; also called capital goods
- Factories, trucks, machines, etc.
- Created by labor, then used for another purpose
Resources are combined in a variety of ways to produce goods and services.
- Good- an item you can see and touch that requires scarce resources to produce and satisfies human wants
- Tractor, farmer, seeds, field are resources that come together to create corn, a good
- Service- something not physical that requires scarce resources to produce and satisfies human wants
- Football stadium, teams, workers, are resources that create a game, a service
