LIKE SCARCITY, NEEDS AND WANTS, AND JUNK LIKE THAT Basic Econ Concepts
Nov 14, 2014
LIKE SCARCITY, NEEDS AND WANTS, AND JUNK LIKE THAT
Basic Econ Concepts
Needs and Wants
Scarcity
“Limited quantities of resources to meet unlimited wants.” What’s that mean?
Scarcity
Your wants are pretty much unlimited. Even if yours personally aren’t, once you add up
everybody in the population, the collective wants are unlimited.
All resources, goods, and services are limited, however.
This means it’s impossible for all the wants to be met.
Scarcity
Economics, then, tries to solve the problem of scarcity. This doesn’t mean to make unlimited stuff, but
figuring how to distribute scarce, limited stuff in the best way to meet wants.
It also wants to see how people satisfy needs and wants by the choices they make. Why X and not Y? Why McDonald’s? Why did banks buy
mortgage-backed securities? Why TXU and not Gexa? Why Crocs? Seriously… why Crocs?
Goods and Services
Goods Stuff.
Services Things people do for others.
Shortage
When there isn’t enough stuff. Not enough of a product can be supplied or it won’t be
supplied. At least not at current prices. If prices go up, it may become profitable for somebody
to provide the good or service and that will eliminate the shortage.
Factors of Production
Land, Labor, CapitalThese have specific meanings in economics.
Land
All natural resources used to produce goods and services.
Labor
Work people get paid for.
Capital
Human-made resources used to produce stuff or provide services. Note this is different from land, which is natural
resources. Two types: Physical and Human.
Physical Capital
Non-human assets used by real humans in production.
Whoa! Check out that physical capital!!!
Physical Capital
This includes things like buildings, factories, equipment, computers, paper, copy machines, etc.
Typically, this increases productivity since you can do more of X and more time is freed up to pursue Y.
Not so much.
Human Capital
The education, experience, abilities, and knowledge of an employee.
These have economic value.Not all labor is equal in value.