When factors of production, or resources, are finite, and the wants are infinite, scarcity becomes the situation.

Economics is the study of choices that best uses scarce resources to satisfy the infinite wants of humans.

Resource allocation: How much resources is allocated into the production of goods/services. There is overallocation, and underallocation.

Four factors of production:

• Land
  • Including natural resources, such as oil reserves and rivers.
• Labour
  • Physical and mental effort that people contribute
• Capital
  • Man made factor of production, machinery, airports. There comes many forms of capital, since many different things fall into this catagory.
• Entrepreneurship
  • The human skill, of being innovative.

Opportunity Cost: The value of the next best alternative that is given up as a consequence of a choice.

Production Possibility Model: Explains the possibilities of production in a graph. Eg: In a simple economy that produces either microwaves or computers,

To create best output, two conditions must be met: All resources must be fully employed, all resources must be used efficiently.

Positive Statements vs Normative Statements: Positive: Describe something, create a hypothesis: if government increases spending in unemployment aid by 5%, then poverty will decrease by 10% Normative Statements: Poverty should be eradicated Positives can be true or false, but normal statements cant. they are simply a belief/ opinion. These two need to be working together.

Sustainability: Not to never use resources, just use it at rate that is slower than it can regenerate.

Equity: The idea of being fair and just