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Published byRonald Patterson Modified over 8 years ago
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Chapter 1: Section 1 What is Economics?
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Scarcity and the Science of Economics Economics – study of how people try to satisfy unlimited & competing needs and wants. Scarcity – basic economic problem that arises because people have unlimited wants with limited resources causing them to make various economic decisions on how to allocate resources efficiently.
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Our Needs and Wants Needs – basic requirements for survival > food, clothing, shelter Wants – something we would like to have > car, watch, cell phone Divided into two groups – goods and services depending on use Goods – useful, tangible items (book, car) Services – work performed for someone (computer repairman)
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Types of Goods Durable goods – last 3 yrs or more (cars, refrigerators) Nondurable goods – last fewer than 3 yrs (food, clothes, pencils) Consumer goods – intended for final use by individuals (shoes, clothes, cars) Capital goods – tools or goods used by business to produce other products (machinery, equipment)
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Paradox of Value Why some essentials such as water are cheaper than nonessentials, such diamonds. Goods and services must be scarce & have usefulness. Diamonds are scarce & useful. Water on the other hand has usefulness, but not scarce.
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Wealth The accumulation of products that are tangible, scarce, have utility and are transferable. Nations – natural resources, factories, stores, highways, money, etc. Individuals – cars, houses, money, etc.
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Questions all Nations Face WHAT to Produce HOW to Produce FOR WHOM to Produce
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Questions all Nations Face WHAT to Produce HOW to Produce FOR WHOM to Produce Why does this matter?
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Gross Domestic Product The monetary value of all final goods, services, and structures within a country’s borders in a 12- month period. GDP is the most comprehensive measure of a nation’s total output and a key measure of its economic wealth.
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