Economic Roles and Economic Measurements Introduction to Business Chapters 3 and 4

Your Three Economic Roles Your Consumer Role Your Worker Role Your Citizen Role

Your Consumer Role You exercise this role every time you make a purchase. Consumers buy more than 2/3s of goods and services produced. Your role as a consumer plays a central role in our economic system. Consumers help businesses make decisions.

Your Consumer Role-The Dollar Vote The Dollar vote-- your decision to buy or not buy certain goods or services. –When you buy something you are “casting” your vote for it. –Businesses receive your dollar votes and those of other customers and knows the DEMAND for its products.

Your Consumer Role-Supply and Demand Demand—the quantity of a product or service that consumers are willing and able to buy at a particular price. Supply—the quantity of a product or service that businesses are willing and able to provide at a particular price.

Your Worker Role You need a job to be a consumer. You work to earn money to purchase your needs and wants. The more you earn the more needs and wants you can satisfy. Your worker role supports your consumer role.

Your Worker Role—Standard of Living Standard of Living—refers to the way you live as measured by the kinds and quality of goods and services you can afford. –The more money you earn the higher standard of living you can afford.standard of living

Your Worker Role-Productivity Labor productivity—the quantity of a good that an average worker can produce in one hour. –The US has a high productivity rate which improves our standard of living as a nation. –The higher your own productivity the more you increase your standard of living. –Improvements in technology and education increase labor productivity.technology

Your Citizen Role-- Some needs and wants you cannot satisfy by yourself. We fullfill our citizen role by paying taxes and voting. Taxes are used to provide public goods. By voting we make collective decisions. Public goods—something needed by a community and provided by its government. Ex: roads, schools, police.

What is GDP? Gross Domestic Product —is the dollar value of all final goods and services produced in our country during one year. GDP is one measure of how our economy is performing GDP must keep growing to have a healthy economy

What is GDP? What are the major categories of expenditures: What consumers spend for food, clothing, and housing and all other wants. What businesses spend for buildings, equipment, and supplies. What government agencies spend to pay employees and to buy supplies. GDP by Country

What is constant dollar GDP? Constant dollar GDP —is the value of gross domestic product after taking out the effect of price changes. GDP per capita – is calculated by dividing by dividing GDP by the total population. GDP per capita by Country

Labor Productivity An important source of economic growth is an increase in output per worker. Productivity increase —an increase in goods and service from the same amounts of labor. –Productivity can be increased through more education and more technology—computers and robotics We can work less and produce more when we increase labor productivity. Downside—we may have fewer jobs for an expanding workforce.

Inflation and Deflation Inflation—a sustained increase in the general level of prices. –Can occur when the demand for goods is greater than supply. –Most think that inflation is harmful because you must pay more for goods and services. –Mild inflation can stimulate economic growth.

What is deflation? A decrease in the general level of prices. –Occurs during recessions or depressions. –Prices are lower but people have less income to buy goods and services. –Deflation was notable during the great depression.