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Chapter 1

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  1. Chapter 1 Section 1 Scarcity and the Factors of Production

  2. need • Something like air, food, or shelter that is necessary for survival

  3. want • An item that we desire but that is not essential to survival • People cannot have everything they need or want, they must consider their options and decide which choice will fill their needs the best • Ex: go to a movie or study for a test

  4. economics • The study of how people seek to satisfy their needs and wants by making choices • Why must people make such choices? • Answer: scarcity

  5. goods • Physical objects such as clothes or shoes

  6. services • Actions or activities that one person performs for another • Ex: haircuts, dental checkups, tutoring

  7. scarcity • Limited quantities of resources to meet unlimited wants • Economics is about solving the problem of scarcity

  8. shortage • A situation in which a good or service is unavailable • Short-term or long-term • Ex: During the holiday season, a customer may see an empty shelf on Tuesday, but return on Friday to find that same shelf filled • Ex: Wars and droughts

  9. Factors of production • Land, labor, and capital; the three groups of resources that are used to make all goods and services • Land-all natural resources used to produce goods and services (fertile soil, coal, water, and forests) • Labor-effort that a person devotes to a task for which that a person is paid (medical aid, assembly line workers, artists’ creations, repair of televisions) • Capital-human-made resource that is used to produce other goods and services (physical and human)

  10. Physical capital • All human-made goods that are used to produce other goods and services; tools and buildings

  11. Human capital • The skills and knowledge gained by a worker through education and experience • Ex: doctors use stethoscopes and their schooling in order to provide their services. Assembly line workers use equipment as well as skills acquired through training and practice to produce goods.

  12. Entrepreneur • Ambitious leader who combines land, labor, and capital to create and market new goods and services • Ex: Bill Gates, Henry Ford, corner store owner