The Economic
WayofThinking
Chapter 1—Section 1—pages 4-11
Section 1 Objectives:
• explain how the economic definition of scarcity differs from
the common
definition
• understand why scarcity affects everyone
• learn three economic questions that societies face because
of scarcity
• describe the four factors of production and their uses
• GLE: Major economic concepts: 1. natural resources, labor,
and capital resources; 2. scarcity; 3. factors of production
What is Scarcity?
Key Concepts
Wants: desires that are satisfied by consuming good or
services. Examples-hunting equipment, cute outfit
Needs: basic needs such as food, clothing, and shelter that
Is needed to survive.
Scarcity: not enough resources to satisfy human wants.
Economics: is a social science that studies how people choose to use
Limited resources to satisfy their wants.
Economics involves:
1 Examining: how individuals, businesses, governments, and societies choose to use
scarce resources to satisfy their wants.
2. Organizing, analyzing, and interpreting data: about those economic behaviors.
3. Developing theories and economic laws that explain how the economy works and to
predict what might happen in the future.
 Choice
is part of the use of limited
resources. Wants are not only unlimited,
they are constantly changing.
 Example: Cell
phones, computers, flatscreen television.
 Wants
are unlimited and resources are
scarce. Choices have to be made on how to
utilize those resources.
 Goods: physical goods in which you
purchase.
 Services: work that one person performs for
another for payment. Example: nurses,
doctors, lawyers, etc…
 Consumers: people who buy goods or
services for personal use.
 Producer: person who makes goods or
provides services.
 Identify
five wants that you have right
now. Describe how scarcity affects your
efforts to meet these wants.
 What
 How
is the economic way of thinking?
does scarcity affect consumers?
Producers? Governments?
 Key
Concepts: Have you considered if
something is worth the money? Scarcity
firsthand has been experienced.
 Question 1: What will be Produced?
 As a society decisions have to be made
on what kinds of goods and services will
be produced.
 Question
2: How Will It Be Produced?
 Societies must decide how goods and
services will be produced. Production is
determined on a societies natural
resources. Societies also have to
consider what kind of labor force they
have is it skilled or unskilled.
 Question
3: For Whom Will It Be Produced?
 The last question involves how should goods
and services be distributed to consumers.
Each society has to develop a system plan
of distribution of goods and services. This
plan would include; rail and road systems,
airports, trucks, ships, seaports, computer
networks, which would move goods and
services from the producers to consumers
in the most efficient system plan.
 Why
does the basic problem of scarcity
lead societies to ask the three
fundamental economic questions?
 What
is the role of scarcity in each of the
three economic questions?
 Are
efficient methods absolute or
relative?
 Task: Answer
the basic economic
questions by creating a simple product.
 Materials: two
boxes of colored markers,
24 paper plates, 12 pencils, two staplers,
two rolls of transparent tape, 4 scissors,
instruction sheets
 You will be divided into
 Each group will receive
two groups.
task instruction
sheets.
 Groups will have 30 minutes to create
products
 Each group will display what they have
produced and discuss how they answered
the first two economic questions.
 For discussion, how will each group
determine who gets the product.
 Compare and contrast the two methods of
producing goods.
UNDERSTANDING OF
CONCEPTS
PRESENTATION OF
INFORMATION

4: excellent

4: clear and complete

3: good

3: mostly clear

2: fair

2: sometimes clear

1: poor

1: unclear
 Key
Concepts: Societies have to answer
the two basic questions---what to
produce and how to produce it. This is
known as Factors of production:
economic resources needed to produce
goods and services.
 1. Factor
1 Land: In economic terms land
is referring to natural resources found on
or under the ground that are used to
produce goods and services.
 2. Factor
2 Labor: Labor in economic
terms is all the human time, effort, and
talent that go into the making of products.
Examples: factory workers, construction
workers, architects, teachers, etc…
3. Factor 3 Capital: In economic terms capital means
all the resources made and used by people to
produce and distribute goods and services.
 Capital is known as physical or real capital.
Example: warehouse, stores, roads, etc…
 Workers invest in human capital – the knowledge
and skills gained through experiences. Human
capital involves job training or college degree.
 Venture Capital: financial resources invested in
businesses considered too risky for mainstream
investing. Example: 1990s dot.com companies is an
example of venture capitalism. Technology
companies or enterprises are associated with
venture capitalism. I. E. Facebook, Microsoft, Apple.

 4. Factor
4 Entrepreneurship: Combination
of vision, skill, ingenuity, and willingness to
take risks that is required to create and run
new businesses. Entrepreneurs anticipate
what consumer want in the market. They are
also involved in developing new product,
marketing and distributing a product.
Entrepreneurs are risk takers who put in
their time, energy, creativity, and money in
making a profit.
 1. Think
of a product that you recently
purchased. How do you think the four
factor of production were used to create
this product?
 2. What is the main difference between
land and capital as a factor of
production?
 3. Which of the factors of production is
most important?
 Task:
Identify the factor of production for a
new product or service.
 Materials Needed: paper, pen, colored
markers.
 Activity:
 A. Think of a new product or service that
you would like to have in your lives. It can
be realistic ( a computer that offers
homework help) or out of the box ( a food
that tastes like French fries but has the
nutrition of broccoli).
•
•
•
B. Identify the specific factors of
production needed to manufacture this
product or provide the service.
C. Create a visual showing how the
factors of production would be used.
D. Each of you will have 3 minutes to
present his or her new product or service
and the visual showing factors of
production needed for its creation.
 In
one paragraph reflect on what you
learned from the production of a new
product activity.
UNDERSTANDING OF
CONCEPTS
PRESENTATION

4. excellent
•
4. Clear and complete

3. good
•
3. mostly clear

2. fair
•
2. sometimes clear

1. poor
•
1. unclear