Basic Economic Concepts

1
Basic Economic Concepts

• Chapter 1.2

2
Goods, Services, Consumers

• Economic products are goods and services that are
  useful, relatively scarce, and transferable. As
  such, they command a price.
• Goods satisfy an economic want (car, iPod, book).
  
• Consumer goods are intended for final use by
  individuals.
• Capital goods are used to produce other goods
  (welding machine, espresso machine, bulldozer).

3

• Durable goods last 3 years with regular use
  (car, espresso machine).
• Nondurable goods last lt3 years with regular use
  (paper, clothes, food).
• Services Intangible products that are performed
  for a consumer (concert, haircut, legal service,
  surgery, boring economics lectures, etc. etc. ad
  nauseam)
• Consumer person who uses goods and services to
  satisfy wants and needs.

4
Value, Utility, Wealth (Oh, My!)

• Value Worth that can be expressed in dollars and
  cents.
• Sometimes contradictions in need and value occur.
• Paradox of Value Water (cheap / necessary)
  Diamonds (not cheap / not necessary).
• Paradox is partially explained by scarcity.
  Water is not scare, diamonds are.

5
Utility

• Value is also determined by utility, or the
  capacity to be useful and provide satisfaction.
• For something to have value, it must be scarce
  and have utility ( diamonds definitely qualify).

6
Wealth

• Wealth is the accumulation of products that are
  tangible, scare, useful, and transferable.
• A countrys wealth is the total of all natural
  resources, houses, factories, consumer goods,
  etc.
• In 1776, Adam Smiths Wealth of Nations dealt
  with peoples skills and abilities as a major
  source of wealth (pens assembly lines).

7
The Circular Flow of Economic Activity (p.15)

• A market is a location or other mechanism that
  allows buyers and sellers to exchange products.
• Factor markets are where any of the four factors
  of production are purchased.
• Product markets are where producers sell goods
  and services to consumers (after payday see
  above).

8
Productivity Economic Growth

• Economic growth is an increase in the total
  output of goods and services in a nation over
  time.
• Productivity is the efficient use of scarce
  resources. Productivity increases when more
  outputs are created with the same amount of
  inputs in the same amount of time.

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Division of Labor Specialization

• Division of Labor occurs when a worker does a
  limited number of specific tasks and becomes more
  productive.
• Specialization occurs when factors of production
  (labor, capital goods, land) perform tasks very
  efficiently.
• Regional specialization Idaho potatoes, Nebraska
  corn, Texas oil

10
Human Capital

• Investing in human capital includes the skills,
  abilities, health, and motivation of people.
• Government education, healthcare
• Business training, education
• Individuals education, motivation (see p.16)

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Economic Interdependence

• Economic interdependence measures how much
  producers and consumers rely on each other and
  are effected by each other.
• i.e. UPS strike workers lose pay, owners lose
  money, business slows, people dont get HSN
  orders on time switch to QVC.