Scarcity Factors of Production The Guiding Factors of

Scarcity & Factors of Production The Guiding Factors of an Economic System

Why Do We Care About The Economy? You live in a DEMOCRACY 1. • Your government decides how/what to spend taxpayer money • You influence the government through voting and active citizenship • If you don’t know what is going on, or do not understand it, you won’t know what is best to help your quality of life You are a CONSUMER 2. • What is available to you to buy is based on how Canada’s economy allocates resources • Businesses provide goods/services based on what you demand Through your actions, you can make Canada the best place to be!

Economy Defined CAN BE DESCRIBED AS: The resources and processes involved in the production, distribution, and consumption of goods and services.

Textbook p. 199 -201

I need new pompoms! Meet the Normal Family: Don’t these kids know that money doesn’t grow on trees? ! I want a new snowboard! Just like the girl in the comic, This family has an ECONOMIC PROBLEM! WHY? Because their WANTS are UNLIMITED, but RESOURCES are LIMITED!

ALL SOCIETIES FACE THE SAME ECONOMIC PROBLEM: SCARCITY UNLIMITED WANTS LIMITED RESOURCES THERE ARE NEVER ENOUGH RESOURCES IN A SOCIETY TO SATISFY ALL THE PEOPLE’S WANTS, THEREFORE A SCARCITY OF RESOURCES ALWAYS EXISTS

How Do Societies Deal with Scarcity? • The distribution of scare resources (scarcity) is the basic economic problem faced by all societies. • Societies must make choices about how to distribute the limited resources to meet the unlimited wants… • They do this by asking 3 basic questions…

Three Basic Economic Question All Societies Must Consider 1. WHAT goods and services to produce Unlimited WANTS SCARCITY Limited THEREFORE, SOCIETIES MUST MAKE CHOICES: 2. HOW goods and services will be produced RESOURCES 3. FOR WHOM goods and services will be produced

Scarcity Activity Get yourself into 4 groups and await further instructions. Using the supplies in your envelopes create the following resources for your “Country”: • Food (four 3 -inch strips of green paper) • Shelter (2 -Inch white square attached to a yellow triangle) • Clothing (a four-color paper chain) • Education (A four-page book with a color cover) You may trade, but ONLY if the other country allows you to trade with them

Scarcity Activity – Follow-up Questions • Why was there a difference between the envelopes? • Did any group “have it all”? • How did trading impact your groups success? • How did you work as a group? • • All together? Did one or two people take charge? How did you utilize your resources? Did any group ask or use the envelope? • Did you use materials as other object? Aka Paper as a ruler? • Were there resources not needed? • Were any resources useless or not tradeable? •

Factors of Production What Causes Limited Resources?

What Limits Supply of Resources We recall that Scarcity is the result of societies unlimited wants being restricted by the limited resources with which we have But…what causes this limitation of resources?

Factors of Production The Factors of Production (FOP) are what cause the limitation of resources, they are: • Land, • Labor • Capital You need all three in order to produce goods and services that societies want.

Land • All natural resources and raw materials used in the creation of products • Includes renewable and non-renewable resources

Labor • The human resource, or people and their skills and knowledge (physical or mental effort), that help create the goods or provide the services

Capital • The Capital resources which includes money or anything that can be used as collateral to get money (property, rare materials, etc. ) • Goods used to make more goods and services are also Capital Resources (factories, tools, etc. )

Example • In a landscaping business, what would be the factors of production? • Land • • Labor • • Grass, mulch, dirt, and flowers used. The wood and metal used to make tools The landscaper (equipped with specialized knowledge about the trade) & their workers Capital • The shovels, rakes, mowers, and trucks. Wages used to pay labor.

To Review • Land + Labor + Capital = Factors of Production (FOP) • A limited supply of any resource (FOP) is called Scarcity • Every society deals with scarcity. The way a society deals with scarcity defines its Economic System (more on this later) • Clear as mud?

Factors of Production Review Activity To ensure understanding – please complete the following sheet correctly placing the items under the appropriate Factor of Production