Economics:
Principles in Action
CHAPTER 1
What Is Economics?
What Is Economics?
Economics is the study of how people
make choices to satisfy their wants.
For example:
You must choose how to spend your time.
Businesses must choose how many people to
hire.
Chapter 1, Section 1
What are goods?
What are services?
• A physical item that
satisfies a need like a
sandwich, a coat or a
house
• An activity that satisfies
a need like a haircut or
legal advice
What is scarcity? What is a shortage? Explain the
difference between scarcity and a shortage.
Scarcity occurs when
there are limited
quantities of
resources to meet
unlimited needs or
desires.
Shortages occur when
producers will not or
cannot offer goods or
services at current
prices.
Chapter 1, Section 1
Is this situation an example of scarcity
or a shortage?
• Watch the video:
http://www.youtube.com/watch?v=hr6RDfVaiJM
Answer the following:
Based on economics concepts, is this video about
scarcity or a shortage?
List 3 suggestions you have to conserve water.
What are the Factors of Production?
• Land All natural resources that are used to produce goods
and services.
• Labor Any effort a person devotes to a task for which that
person is paid.
• Capital Any human-made resource that is used to create
other goods and services.
• Entrepreneur-a person who organizes, manages, and takes
on the risks of a business
Chapter 1, Section 1
What are the two types of capital?
• Human Capital is the knowledge and skills
that workers have gained through education,
training, and experience.
• Physical Capital is all human made goods that
are used to produce other goods and services;
tools, equipment and buildings
The Factors of Popcorn Production
Land
Labor
Capital
Entrepreneur
Popping Corn
The human effort
needed to pop the
corn
Corn-Popping Device
Person who takes risk of going
into popcorn business
Vegetable Oil
Chapter 1, Section 1
Good Humor Shortage Puts Ice Cream
Man in Bad Mood
• Read and complete assignment
• Then watch the video:
– http://science.discovery.com/videos/howits-made-mini-episodes-ice-creamtreats.html
– List examples of the factors of production
used to create the item that is the subject
of the video
Section 1 Review
1. What is the difference between a shortage and
scarcity?
–
–
–
–
(a) A shortage can be temporary or long-term, but scarcity always exists.
(b) A shortage results from rising prices; a scarcity results from falling prices
(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.
(d) There is no real difference between a shortage and a scarcity.
2. Which of the following is an example of using
physical capital to save time and money?
–
–
–
–
(a) hiring more workers to do a job
(b) building extra space in a factory to simplify production
(c) switching from oil to coal to make production cheaper
(d) lowering workers’ wages to increase profits
Chapter 1, Section 1
Test yourself
• Complete Chapter 1 Section 1 quiz review at:
http://quizlet.com/_7kstp until you get 100% on all
vocabulary
• Take the Economics Chapter 1 Section 1 quiz at:
– http://www.studyisland.com/web/index/
• Test yourself using these materials until you have
mastered them. You will be given a unit test on each
topic.