Economics - Economics is the study the production and distribution of goods and services, it is the study

of human efforts to satisfy unlimited wants with limited resources.

Production
The following flow diagram describes what economists mean when they talk about production.

Resources are inputted into a production process, which yields an output. The
production process itself embodies the technology used to produce the output. An
increase in technology will make it possible to produce more output with the same level
of resources or make it possible to produce the same output with fewer resources.
There are four general types of resources:
Type of Resource Abbreviation Return

Labor L wages

Land (natural resources) N rent

Capital K interest

Entrepreneurship E profit
Labor is often referred to as "human capital," an acknowledgement that labor resources are often made
more productive through education or training. Capital is one of the most confusing types of resources,
largely because many students think of Capital as primarily financial rather than as a productive resource.
However, not only is Capital a productive resource, but it is also always itself the result of a production
process. Land is an inclusive category that includes all kinds of natural resources. The only condition that
must be met is that the resource cannot be the result of a production process, which would make the
resource Capital rather than Land. Entrepreneurship is really just a particular type of Labor, that type of
labor that organizes all of the other resources in a productive enterprise. As a result, Entrepreneurs
receive profit – the amount of money that is left after all other resources have been paid.

Factors of Production/Resources - these are those elements that a nations has at its disposal to deal
with the issue of scarcity. How efficiently these are used determines the measure of success a nation
has. They are
Land - natural resources, etc.
Capital - investment monies.
Labor - the work force; size, education, quality, work ethic.
Entrepreneurs - inventive and risk taking spirit. This is a rather new addition to a tradirtional list.
Scarcity - the fundemental economic problem facing ALL societies. Essentially it is how to satisfy
unlimited wants with limited resources. This is the issue that plagues all governmet and peoples. How do
we conquor the issue of scarcity? Many people have thoaught they had the answer (see Marx, Smith,
Keynes, etc.) but the issue of scarcity still exists.The "Three Basic Economic Questions" - these are the
questions all nations must ask when dealing with scarcity and effcientlly allocating their resources.
What to produce?
How to produce?
Basic Economic Choices/Questions
All economies face four basic choices, questions that must be answered for an economy to work well.
1. WHAT goods will be produced?
Initially society must decide what goods, specifically, they wish to produce.
2. HOW will resources be used in the production process?
Once it has been decided exactly what goods will be produced, the next question that must be addressed
is exactly how these goods will be produced. This question focuses on issues such as the type of
technology to be used, whether the production process should be labor intensive or capital intensive, and
so forth. The most important focus for economists is on the issue of producing output with the fewest
resources or the lowest costs.
3. WHO will receive the goods?
Once the goods have been produced, the next crucial question that remains deals with who, specifically,
will get these goods. In a market economy, which replies upon money for many transactions, this question
is essentially one of determining the distribution of income. Higher income, in a market economy,
translates into the ability to purchase more goods and services. Thus, this question focuses on issues of
taxation and subsidies.
4. When will production occur?
The final question deals with the timing of production. Sometimes the timing of production is determined
by nature, as in the case of many agricultural products that are produced in a particular season. This
leads us directly to another relevant issue for this question, the storage and wastage of perishables. For,
while many goods can only be produced in a particular season, most often consumption of those goods
takes place during the entire year. Sometimes the timing of production is determined by society. For
example, in Western society the largest season for retail sales occurs just prior to Christmas.