AP Macroeconomics

## Scarcity and economic resources **Scarcity** is the condition that wants are unlimited while the resources available to satisfy them are limited. Because of it, every individual, business and government has to choose, and choosing one use of a resource means giving up another. Scarcity is not the same as shortage: a shortage is a market condition at a particular price, whereas scarcity exists at every price and in every economy, including rich ones. **Economic resources**, also called factors of production, are the inputs used to produce goods and services. | Resource | What it is | Payment it earns | |---|---|---| | Land | natural resources: ground, water, minerals, forests | rent | | Labor | the physical and mental effort of workers | wages | | Capital | physical capital such as machines, buildings and tools (not money) | interest | | Entrepreneurship | organizing the other resources and taking the risk of a new venture | profit | Human capital is the knowledge and skill workers acquire through education, training and experience. It raises the output a worker can produce, so economists treat it as part of the productive capacity of an economy alongside physical capital. ## Opportunity cost The **opportunity cost** of a choice is the value of the best alternative given up. It is measured in what is sacrificed, not only in money. A student who spends an afternoon at a part-time job gives up the study they would otherwise have done, and an economy that builds more roads…