ScarcitySSEF1 The student will explain why limited productive

resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.

a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.

b. Define and give examples of productive resources (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).

c. List a variety of strategies for allocating scarce resources. d. Define opportunity cost as the next best alternative given

up when individuals, businesses, and governments confront scarcity by making choices.

What is scarcity?

Scarcity is a condition that exists when infinite, or unlimited, wants exceed limited, or finite, resources

Scarcity

Scarcity

• Doesn’t always mean a shortage. It means that resources are always finite and wants are generally infinite.

• Individuals, businesses and governments have to deal with scarcity.

What are productive resources?

• Productive resources are anything that can be used do create goods or services

• Consider this item. What are some of the resources required to create this shirt?

4 types of Productive Resources

• Natural resources, human resources, capital resources, and entrepreneurship

• These are often referred to as “Land, Labor, and Capital, and Ownership”

• All productive resources (also called “economic resources”) will fall under one of these four categories

Natural Resources

• All land and raw materials used for production.

• What are some examples of natural resources or raw materials?

• What natural resources are required for the production and distribution of the shirt we saw earlier?

Human Resources

• Also known as “labor”• Can include physical labor or mental labor• Farmers, Factory workers, Computer

Programmers, Management• Any people whose efforts are required to

create a good or service• What human resources might we need to

produce and sell our shirt?

Capital Resources

• Any resource made by humans used to create a good or service

• Can include factories, money, machinery, vehicles, technology

• What capital resources were needed to produce our shirt?

Entrepreneurship

• Also called “ownership”• The leadership that organizes land, labor and

capital• In a capitalist society this is done by private

individuals with their own money in a free market

• In command economies government provides entrepreneurship.

Allocation of resources

• Economics answers three questions:• 1) What will be produced?• 2) How much will be produced?• 3) For whom will it be produced?

• Consider the example of our T-shirt. What are some ways we might choose to distribute our shirts?

Tradeoffs/Opportunity costs

• Every economic transaction involves a trade-off. A trade-off simply means that we give up one thing to have another. We can’t afford everything. If we spend 10 dollars on a shirt, that 10 dollars could have instead been spent on a CD, 3 pair of socks, a case of cola, or could have been saved and put towards a more expensive item.

• Trade offs are expressed in economics in terms of “opportunity costs”. This is usually represented in terms of the cost of the most valuable thing one could have gotten instead of the chosen good or service.

Opportunity costs

• Have you ever made a trade-off? • What are some of the trade-offs made by

businesses?• What are some trade-offs faced by

government?