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Scarcity is the basic fact of economic life. Human needs and wants are always greater than the resources available to satisfy them. Thus, choices must ben made concerning how to best use the limited resources available. To make these choices, an economic system or society must answer three basic economic questions. Once an economic system has answered these questions, production must be carried out as effectively as possible. To reach the highest possible levels of productivity, producers may rely on division of labor and specialization. VIDEO OBJECTIVES - Determine why scarcity exists - Identify the issues that producers must address to distribute resources - Explain why producers study productivity

Scarcity requires choice. Economists call the sacrifices of one choice for a trade-off and the next best choice an opportunity cost. The production possibilities curve can be used to analyze the trade-offs and opportunity costs involved in producing specific combinations of goods and services. VIDEO OBJECTIVES - Understand why sacrifice is an important element of economic choice - Identify the assumptions involved in creating a production possibilities curve - Determine why future production possibilities might differ from current production possibilities