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Warm-Up The Three Questions of Economics

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Words to Know

Fill in this table as you work through the lesson. You may also use the glossary to help you.

limited restricted within boundaries

factors of production resources needed to produce a good or service

needs goods that are necessities for survival and health

wants goods that are desired despite not being needed for survival

WK2

Lesson Goals

Learn about

the three

questions of

economics.

Explain how the factors

influence the answers

to these questions.

production Discover the three questions of

economics .

Lesson Question

How do the three questions of economics influence economic decisions?

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Warm-Up The Three Questions of Economics

The Three Questions of Economics

What should be

produced?

How should goods and

services be created?

The Three Economic Questions

product?

Who should receive the

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The Three Questions of Economics

Deciding What to Produce in the Economy

Economies must decide what to produce by:

• considering what people need and want .

• evaluating which resources are available .

• planning how to use resources.

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Instruction

Deciding How to Produce in the Economy

Economies must decide how to make goods and services by:

• considering how things have traditionally been made.

• exploring how to produce items at a lower cost or higher quality.

• determining how to make the biggest profit .

Deciding Who to Produce For

Economies must decide who gets goods and services by:

• considering who has the greatest need .

• understanding who is in a position of authority.

• identifying who has the greatest ability to pay .

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The Three Questions of Economics

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5

Producers and the Three Economic Questions

As economies must answer the three economic questions, so must

producers .

Businesses must determine:

• what to produce.

• how to produce it.

• for whom to produce.

Factors That Influence the Three Questions

The cost of producing an item is determined by the factors of production.

• Land

• Labor

• Capital

Instruction

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The Three Questions of Economics

5Slide

Limited Factors of Production

The resources that make up the factors of production are limited .

• Economies must answer the three economic questions based on their limitations.

• The best way to use limited resources must be determined.

Factors of Production: Land

Economies must answer these questions based on the type of usable land available.

• Some land may be better for agriculture.

• Other land may be better for industry , such as factories or offices.

Factors of Production: Labor

Labor is limited to the number of citizens able to work within a given field, as determined by:

• population.

• standard of living.

• education .

• geography.

Instruction

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The Three Questions of Economics

Making Economic Decisions

Economies must consider their limitations along with the:

• needs of citizens.

• wants of citizens.

• benefits to all of society.

The Three Economic Questions Left Unanswered

If economies function without answering the three questions, it means:

• scarce resources will be depleted .

• needs of citizens will not be met.

• the economy will not grow .

Instruction

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7

Factors of Production: Capital

Capital is limited to an economy’s monetary and physical resources.

• Money available to invest in production is limited.

• Physical resources are limited.

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The Three Questions of EconomicsSummary

2Slide

Review: The Three Economic Questions

What should be

produced?

How should goods and

services be created?

The Three Economic Questions

product?

Who should receive the

Answer

(Sample answer) The three questions of economics determine what is produced, how it is produced, and for whom it is produced. The answers to these questions are determined by the available land, labor, and capital and the needs and wants of citizens.

Lesson Question

How do the three questions of economics influence economic decisions?

?

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The Three Questions of EconomicsSummary

Review: Answering the Three Questions

You have learned that:

• factors of production must be considered when answering the questions.

• economies must answer the questions to meet citizens’ needs and wants.

• negative consequences may occur if these questions go unanswered.

Use this space to write any questions or thoughts about this lesson.

2Slide