ECONOMICS

CHAPTER 1, SECTION 2-SCARCITY AND CHOICE

I. Scarcity

• A. Definition-Scarcity is the condition that occurs when limited resources meet unlimited wants and needs.

II. Allocation

• A. Allocation is a response to scarcity.

• B. Definition-Allocation is the distribution of resources which is done to satisfy the greatest number of needs and wants.

II. Allocation

• C. 3 questions must be answered to allocate resources effectively:

• 1. What to produce?• 2. How to produce?• 3. For whom to produce?

What to produce?

Howto produce?

For whom to produce?

Choices

Scarcity

Unlimited wantsAnd needs

Limited Resources

III. Productivity

• A. Productivity is used to determine if resources are being used wisely.

• B. Definition-Productivity is the rate at which goods are produced, and the amount produced, compared with the work, time, and money needed to produce them.

III. Productivity

• C. Efficiency-Using the smallest amount of resources to produce the greatest amount of output.

• D. 3 ways to improve efficiency:• 1. Division of Labor-Assigning a small

number of tasks to each worker.

III. Productivity

• 2. Specialization-When workers gain expertise in their assigned tasks; occurs because of division of labor.

• 3. Mechanization-Replacing workers with machines that work faster and longer hours.