Economics Midterm

What are the four factors of production? How are they defined?

Land-Includes all natural resources found in the earth Labor-all human time, effort and talent that go into the making of products Capital-all the resources made and used by the people to produce and distribute goods and services Entrepreneurship-Combination of vision, skill, ingenuity and willingness to take risks that is needed to create and run a new business

Why is choice at the heart of economics?

Scarcity forces everyone to choose, The choices people make are shaped by incentives, by expected utility and by the desire to economize.

Scarcity affects everyone because...

wants are unlimited and resources are scarce so choices have to be made about how to best use those resources. Scarcity affects which goods are made and which services are provided.

3 basic economic questions everyone faces because of scarcity

1. What will be produced? 2. How will it be produced? 3. For whom will it be produced

Scarcity: basic economic definition

All people have unlimited wants and limited resources, scarcity exists when there is not enough resources to meet those wants, economics is basically the study of how people choose to use scarce resources to satisfy their wants.