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Factors of Production. What to do with the fundamental economic problem of scarcity?. Three Basic Questions. In order to solve the problem of scarcity, economists must attempt to answer three basic questions. What? How? For Whom?. What must we Produce?.

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Factors of production

Factors of Production

What to do with the fundamental economic problem of scarcity?


Three basic questions
Three Basic Questions

In order to solve the problem of scarcity, economists must attempt to answer three basic questions.

What?

How?

For Whom?


What must we produce
What must we Produce?

  • Society must choose based on its needs


How to produce
How to Produce?

  • Society must choose based on its resources


For whom to produce
For Whom to Produce?

  • Society must choose based on its population and other available markets


Technology has fundamentally changed how we live. “I want my MTV”…and my refrigerator, color tv,  and microwave oven.


Which group of people ultimately determines the products that a free enterprise economy produces
Which group of people ultimately determines the products that a free enterprise economy produces?

  • Congress

  • Local government

  • property owners

  • consumers


Factors of production1
Factors of Production that a free enterprise economy produces?

  • Once a society is ready to work on answering the three basic questions, they must then turn to their available factors of production (the resources needed to produce what people want and need).


  • The society’s limited that a free enterprise economy produces?natural resources

    • Landforms

    • Minerals

    • Vegetation

    • Animal life

    • Climate


Capital
Capital that a free enterprise economy produces?

  • The means by which something is produced

    • Money

    • Tools

    • Equipment

    • Machinery

    • Factories

Capital Goods - Any tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery.


Labor human resources
Labor (Human Resources) that a free enterprise economy produces?

  • The workers who apply their efforts, abilities, and skills to production

    • Physical Abilities

    • Mental Abilities


Entrepreneurship
Entrepreneurship that a free enterprise economy produces?

  • Risk-takers who combine the land, labor, and capital into new products

    • Makes basic business policy decisions

    • Innovator for new products, production techniques, organizational forms

    • Bears the risk of time, effort, and funds


Production
Production that a free enterprise economy produces?

  • Creating goods and services—the result of land, capital, labor, and entrepreneurs


Bill gates
Bill Gates that a free enterprise economy produces?

  • Capital

  • Land

  • Labor

  • Entrepreneurship


Factory
Factory that a free enterprise economy produces?

  • Land

  • Labor

  • Capital

  • Entrepreneurship


Iron ore
Iron Ore that a free enterprise economy produces?

  • Land

  • Labor

  • Capital

  • Entrepreneurship


Assembly line worker
Assembly line worker that a free enterprise economy produces?

  • Land

  • Labor

  • Entrepreneurship

  • Capital


Capitalism is a competitive economic system in which private citizens own the factors of production
Capitalism is a competitive economic system in which private citizens own the factors of production.

  • True

  • False


The entrepreneur organizes land capital and labor for production in hopes of earning a profit
The entrepreneur organizes land, capital, and labor for production in hopes of earning a profit.

  • True

  • False


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