1
Robert L.Sexton “Exploring Economics”
Chapter 2: The Economic Way of Thinking
2.1 Scarcity
Most of economics is knowing certain principles well and knowing when and how
to apply them.
Economics is concerned primarily with
scarcity how well we satisfy our unlimited
wants in a world of limited resources. People are not able
to fulfill all of their
wants, both material and non-material. As long as human wants exceed available
resources, scarcity will exist.
Scarcity is not the same thing as rarity.
The scarce resources that are used in the production of
goods and services can be
grouped into four categories: labor, land, capital, and entrepreneurship.
Labor is the total of both physical and mental effort expended by people in the
production of goods and services.
Land includes the natural resources used in the production of goods and services.
Capital is the equipment and structures used to produce other goods. It also
includes
human capital, the productive knowledge and
skill people receive from
education and on-the-job training.
Entrepreneurship is the process of combining labor,
land and capital to produce
goods and services. Entrepreneurs make the tough and risky decisions about what
and how to produce. Entrepreneurs are always looking for new ways to improve
production techniques
or to create new products, lured by the chance to make a
profit.
We are all entrepreneurs when we try new products or when we find better ways to
manage our households or our study time.
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