goods, services, and consumers
Economic products are goods or services that are useful, relatively scare, and transferable.
Goods
Goods
- A good is a tangible economic product that is useful, relatively scare, and transferable to others.
- Consumer goods are goods intended for final use by consumers rather than businesses.
- Durable goods are goods that last for at least three years when used regularly.
- Non-durable goods are goods that wears out or lasts for fewer than three years when used regularly.
- A service is work or labor performed for someone.
- The difference between a good and a service is that a good is tangible, or something that can be touched, while a service is not.
- Consumers are the people who use goods and services to satisfy their wants and needs.
- As consumers, people indulge in consumption, the process of using up goods and services in order to satisfy wants and needs.
value, utility, and wealth
The value of a good or service depends on its scarcity and utility.
In economics, value refers to a worth that can be expressed in dollars and cents.
The Paradox of Value
In economics, value refers to a worth that can be expressed in dollars and cents.
The Paradox of Value
- Adam Smith was one of the first people to describe how markets work.
- The paradox of value is the apparent contradiction between the high monetary value of a nonessential item and the low value of a essential item.
- For something to have value, it must also have utility, or the capacity to be useful and provide satisfaction.
- For something to have monetary value economists decided, it must be scare and have utility.
- The emphasis on monetary value is important to economists.
- In an economic sense, the accumulation of products that are tangible, scare, useful, and transferable from one person to another is wealth.
- Services are not tangible, and are not considered wealth.
the circular flow of economic activity
The economic activity in markets connects individuals and businesses.
The key feature of this circular flow is the market, a location or other mechanism that allows buyers and sellers to exchange a specific product.
Factor Markets
The key feature of this circular flow is the market, a location or other mechanism that allows buyers and sellers to exchange a specific product.
Factor Markets
- Market where the factors of production are bought and sold.
- This is where entrepreneurs hire labor for wages and salaries, acquire land in return for rent, and borrow money.
- A market where goods and services are bought and sold.
- The wages and salaries that individuals receive from businesses in the factor markets returns to businesses in the product markets.
- Businesses then use this money to produce more goods and services, and the cycle of economic activity repeats itself.
productivity and economic growth
A nation's economic growth is due to several factors.
Economic growth occurs when a nation's total output of goods and services increases over time.
Productivity
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 within a given amount of productive factors.
- Productivity goes up whenever more can be produced with the same amount of resources.
- Sum of people's skills, abilities, health, knowledge, and motivation.
- Businesses can invest in training and other programs to improve the skills of their workers.
- Division of labor is a way of organizing work so that each individual worker completes a separate part of the work.
- Specialization takes place when factors of production perform only tasks they can do better or more efficiently than others.
- Mutual dependency of one person's, firm's or region's economic activities on another.
- The U.S. economy is very reliant on other parts of the country.
- The gains in productivity and income that result from specialization almost always offset the costs associated with the loss of self-sufficiency.