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Basic Economic Concepts. Economic Terms. Economic products: goods and services that are relatively scarce, and transferable to others. Good: A specific item that you buy. Service: Work performed for someone Consumer: a person who uses goods and services to satisfy wants and needs.
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Economic Terms • Economic products: goods and services that are relatively scarce, and transferable to others. • Good: A specific item that you buy. • Service: Work performed for someone • Consumer: a person who uses goods and services to satisfy wants and needs.
Types of Goods • Consumer good: Intended for final use by individuals. • TV for personal use • A personal cell phone. • Capital good: goods produced for the purpose to be used in the production of other goods • Raw lumber to be used to build tables. • A computer in a High School
Value • What do Americans consider valuable? • Value refers to the worth that can be expressed in dollars and cents.
Why are some needs not expensive? • Its called the Paradox of Value. • The concept at which necessities, such as Water, has a low monetary value. • However, non-necessities, such as diamonds, have a high monetary value.
Paradox of Value • In order for something to have value it MUST be scarce. • Even though we need water to survive, it’s so plentiful in most areas that it has little or no monetary value. • Diamonds, on the other hand, are very scarce than therefore more valuable.
Utility • Also for something to have value it needs to be useful and provide satisfaction. • It’s hard to say how useful something is, it depends on the person to determine how valuable the item is. • For something to have value it must be scarce AND useful
Wealth • What makes a person Wealthy? • In the economic sense, wealth is the accumulation of items that are tangible, scarce and useful.
Market Types • General Market: a location or other mechanism that allows buyers and sellers to conduct market transactions • Factor Market: Markets where people go to work to produce goods. • Product Market: Markets where goods are sold to individuals
Economic Growth • Economic Growth: Happens when a nations output of goods and services increases over time. • Several factors lead to economic growth • Investing in human capital • Division of Labor • Specialization • Productivity
Investing in Human Capital • Often times companies will pay for training or higher education as long as you agree to work for their company for X number years. • Governments will support educational programs to ensure they are getting the best minds then can within their borders.
Division of Labor • Happens when work is arranged so that individual worker do fewer tasks then before. • This allows workers to become specialized in areas of their job.
Specialization • Specialization is not limited to an individual worker. • Often times regions of a country will specialize in a particular product • “Steel Belt” In the Great Lakes Area. • Oil Industry in most of Texas. • Farming in the Mid-west • Coal Production in Virginia and West Virginia
Productivity • The most important factor of economic growth. • Yet this key hinges on the above three. • In order to produce more jobs, items must be bought to increase demand. • Once demand is up then a company needs to produce more and more jobs are created. • As Consumer wealth increases, consumers tend to buy more stuff, boosting the profits of business.
Economic Interdependence • We live in a Globalized society, meaning that countries rely on each other to survive. • Events in one part of the country or half a world away can have an impact on the modern global society. • EX: gas prices rose sharply when Katrina hit the gulf coast, in addition to the other storms that were active that year. The price stayed high until supply was able to catch up to demand.
