2. ECONOMICS CHAPTER 1 SECTION 3

3. NEEDS AND WANTS NEEDS: a basic requirement for survival Ex. Food, shelter, and clothing WANTS: is a means of expressing a need Ex. Pizza, hamburger, or taco

4. GOODS, SERVICES, AND CONSUMERS GOODS: is a tangible commodity Ex. book, car, or cell phone SERVICES: work that is performed by someone Ex. haircuts, home repairs & the work that teachers and doctors perform  CONSUMERS: people who use goods and services to satisfy wants and needs

6. PRODUCTS Free Products: Products that are so plentiful, no one can own them. Examples: sunshine, air Economic Products: Goods and services that are useful, relatively scarce and transferable to others. A price can be placed on these things. Examples: computers, football players, volleyball nets

7. TYPES OF GOODS Consumer Good: Intended for final use by individuals (chairs, clothes, cars) Capital Good: A manufactured good used to produce other goods and services (oven in a bakery, x-ray machine in doctor’s office) Durable Good: Any good that lasts 3 or more years when used on a regular basis. Can be both consumer goods and capital goods (chairs, ovens) Nondurable Good: An item that lasts for less than 3 years when used regularly (food, clothing, toothbrushes)

8. CONSUMPTION Consumption: the process of using up goods and services in order to satisfy wants and needs (practiced by consumers) Conspicuous consumption: the use of a good or service to impress others (buying flashy cars, designer clothes, excessive jewelry)

9. Think – Pair - Share What are some expensive goods or services you want to consume? What are the brands that make an impression on your peers? What is the biggest example of conspicuous consumption you have seen?

10. PARADOX OF VALUE PARADOX OF VALUE: Water is essential for survival, but almost free. Diamonds are not essential, but cost a lot of $$$. Why? UTILITY: the capacity to be useful to someone Scarcity + Utility = VALUE

11. THINK-PAIR-SHARE What are some other nonessential goods that have a lot of value?

12. Adam Smith – The Wealth of Nations Productivity: more highly skilled workers, new technology, and specialization led to greater technology Wealth: sum of all the nation’s goods produced by labor, regardless of who owns those goods The Invisible Hand: competition and the market system working together guiding resources to their most productive use The Role of Government: government intervention in the economy should be kept to a minimum Laissez-Faire: French for “let do,” “let it be” or “leave it alone,” applied to economics to mean no government intervention in economic affairs

13. WEALTH the sum of those economic products that are tangible, scarce, useful, and transferable from one person to another goods are counted as part of a nation’s wealth, but services are not

14. PRODUCTIVITY Productivity: the efficient use of productive resources. Increases when more output can be produced with the same amount of inputs. Also goes up if the same output can be produced with fewer inputs. Specialization of labor: workers perform the task they can do the best. Human capital: the sum of skills, abilities, health, and motivation of people.

15. ECONOMIC INTERDEPENDENCE MARKET: a location or other mechanism that allows buyers and sellers to deal readily in an economic product FREE ENTERPRISE ECONOMY: one in which consumers and privately owned businesses, rather than the government, jointly make the decisions FACTOR MARKET: a market where productive resources are bought and sold (companies hiring workers, banks loaning entrepreneurs startup money) PRODUCT MARKET: a market where producers offer goods and services for sale (CD store, Hallmark, Wal-Mart)