1. Ch. 1 Section 2 & 3 Guided Notes

2. Economic Concepts, Choices, & Decision Making
Economics is concerned with economic products: goods & services that are USEFUL, SCARCE & TRANSFERABLE to others
Economic products (goods & services) help us satisfy our wants and needs. They command a price because they are both SCARCE AND USEFUL.

3. How do goods have value?
The value of a good is determined by its SCARCITY (how available it is to you) and UTILITY (ability to produce satisfaction).

4. The Circular Flow of Economic Activity
The diagram shows the amount of economic interdependence in our economy.
What does it mean to be “interdependent”?

5. Factor market- where the factors of production (land, labor, capital, & entrepreneurship) are bought and sold.
- When we go to work our employer pays us for our labor.
- When we own land and someone pays us rent for use
of that land.
Product Market- after we get paid for our labor, we spend that money to buy the products and services that were created in the factor market.
-money is returned to the businesses and they use the
money to produce more goods & services.

6. Economic Growth Factors
A nation’s economic growth is due to the following factors:
1. productivity- when scarce resources are used
efficiently
2. investing in Human Capital- adding to an individual’s
skills, abilities, health, knowledge, & motivation
3. division of labor & specialization- dividing up work makes specialization possible and allows a business to function more efficiently
4. economic interdependence- we depend on others and they depend on us (the gains in productivity & income that result from specialization tends to offset
the costs)