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Ch 1 sec 2

Ch 1 sec 2. Basic Economic Concepts. Goods, Services, and Consumers. Goods Consumer goods – intended for final use by individuals Capital goods –goods used to produce other goods and services Durable goods last three or more years Nondurable goods last less than three years.

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Ch 1 sec 2

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  1. Ch 1 sec 2 Basic Economic Concepts

  2. Goods, Services, and Consumers • Goods • Consumer goods – intended for final use by individuals • Capital goods –goods used to produce other goods and services • Durable goods last three or more years • Nondurable goods last less than three years.

  3. Goods, Services, and Consumers • Services • An economic product that is a service or work that is performed (ex: haircut, concert, home repair, lawn care etc.) • Doctors, lawyers, and teachers are examples. • Consumers use-consume goods and services.

  4. Value and Wealth • Value • Worth that can be expressed in dollars and cents. • Paradox of Value • The situation where some necessities, such as water, have little monetary value, whereas some non necessities such as diamonds have a much higher value. • Wealth • An accumulation of products that are tangible, scarce, useful, and transferable (goods but not services).

  5. The Circular Flow of Economic Activity • Markets are locations/mechanisms for buyers and sellers to trade. They are classified as local, regional, national, global, and cyberspace. • A factor market is where people earn their incomes. Factor markets center on the four • factors of production: land, capital, labor, and entrepreneurs. • A product market is where people use their income to buy from producers. Product • markets center on goods and services.

  6. Productivity and Economic Growth Productivity is a measure of the amount of output produced by the amount of inputs within a certain time. Productivity increases with efficient use of scarce resources. Specialization and division of labor may improve productivity because they lead to more proficiency (and greater economic interdependence). Economic growth depends on high productivity.

  7. Ch 1 sec 3 • economic interdependence. Actions in one place have an economic effect on another place • The opportunitycost of doing something is the next best alternative, or trade-off, that you give up. • cost-benefit analysis evaluates alternatives

  8. Sec 3 continued • A decision-making grid can be used to help evaluate alternatives.  • A production possibilities frontier shows the various possible combinations of output that can be produced when all resources are fully employed; • production inside the frontier occurs when some resources are idle

  9. Production Possibility Curve Guns Butter

  10. Guns - military in billions Butter - civilian in billions

  11. When economic growth takes place, the production possibilities frontier shifts outward.

  12. X y

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