Section 2: Basic Economic Concepts Essential Question: How can economic interdependence be both a good thing and a bad thing?

Economic products = fairly scarce goods/services, and are transferable You are a consumer when? Goods – useful tangible items Consumer goods – final use by individuals Durable goods – lasts 3+ years (cars) Nondurable goods – lasts <3 years Service – not tangible Consumers – looking to satisfy wants/needs

The value of a good/service depends on its scarcity and utility Value – the worth as determined by the market Product must be ______ and have _______? Why are some goods more valuable than others? How are value and utility related? Why are essential items more $, while nonessentials are more $? -- Paradox of Value What is the solution to the paradox of value? Wealth = tangible, scarce, useful, transferable products (See Adam Smith – Wealth of Nations)

The economic activity in markets connects individuals and businesses Factor markets vs. Product markets

Economic Growth Circular flow grows larger = more income/more factors of production Benefit when scarce resources are used efficiently = productivity How would economic growth be affected if productivity declined? How does it go up? Human Capital – invest in it by providing education, training, and programs to improve skills

Division of Labor and specialization can improve productivity Specialization – when factors of production perform only tasks they can do better or more efficiently Assembly line? We rely on others and others rely on us, to provide most of the goods and services we consume – economic interdepence

1. How is economic growth related to productivity? 2. How does economic interdependence affect people and businesses in an economy? 3. Why is investing in human capital beneficial? 4. How might major events such as labor strikes affect you and your community? 5. Explain how you fit in the larger economy when you receive a paycheck. (paragraph)