Economics Chapter 1 Section 2

Goods, Services and Consumers Economic products- goods and services that are useful, relatively scarce, and transferable to others Good- an item that is economically useful, or satisfies an economic want Consumer good- is intended for final use by individuals Capital goods- manufactured goods that are used to produce other goods and services

Goods, Services and Consumers Any good that lasts 3 yrs. Or more is called a durable good Service- work that is performed for someone (intangible) Consumer- a person who uses a goods and services to satisfy wants and needs

Value, Utility, and Wealth Value- refers to a worth that can be expressed in dollars and cents Paradox of value- the situation were some necessities, such as water, have little monetary value, whereas some non-necessities (diamonds) have a much higher value Scarcity is required for value

Value, Utility, and Wealth Utility- the capacity to be useful and provide satisfaction Utility of a good or service may vary from one person to another For something to have value it must be scarce and have utility- this is the solution to the paradox of value

Value, Utility, and Wealth Wealth- the accumulation of those products that are tangible, scarce, useful, and transferable from one person to another A nations wealth is comprised of all items- natural resources, factories, stores, houses, motels… Services are not counted as wealth because they are intangible, but services are useful in creating wealth

The Circular Flow of Economic Activity Market- a location or other mechanism that allows buyers and sellers to exchange a certain economic product Factor Markets- the markets where productive resources are bought and sold, this is where entrepreneurs hire workers, acquire land for rent, and borrow money for interest. You go to work and sell your labor to an employer

The Circular Flow of Economic Activity Product markets- markets where producers sell their goods and services to consumers- the money individuals receive in factor markets returns to businesses in product markets- figure 1.3

Productivity and Economic Growth Economic Growth- occurs when a nation’s total output of goods and services increases over time Productivity- a measure of the amount of output produced by a given amount of inputs in a specific period of time. Often discussed in terms of labor, but it applies to all factors of production

Division of Labor and Specialization Division of labor- takes place when work is arranged so that individual workers do fewer tasks then before Assembly line Specialization- when factors of production perform tasks that they can do relatively more efficiently than others. Also regional specialization- Idaho potatoes

Investing in Human capital Human Capital- the sum of the skills, abilities, health and motivation of people Gov’t can invest by providing education and health care Business can invest in training Individuals invest in themselves

Economic Interdependence Economic interdependence- we rely on others, and others rely on us, to provide the goods and services that we consume Pro basketball player strike will effect many people