Economic Activity and Productivity Economics Pt. 1, Lesson 4

Sectors of the Economy Sectors are different groups of decision makers in our economy Consumer sector: Individuals earn income to purchase goods and services Business Sector: businesses offer goods and service for sale, the money they receive for these goods are used to manufacture additional products

Sectors of the Economy Government Sector: government produces goods and services such as national defense and education Government also purchases goods and services to help them fulfill their job Government earns revenue by charging tuition, bus fares, etc; how else does govt. get its money? Foreign Sector: We sell products too and buy products from other countries Sectors form a circular cycle in our economy

Productivity Increased productivity is important Growth in the economy occurs when a nation’s total output of goods and services increases over time Productivity: measure of the amount of output produced by a given number of producers Do we want productivity to increase or decrease? What can cause that? Everyone one benefits when resources that are scarce are used more efficiently Increased productivity is important

Productivity on the Job Specialization: takes place when people, businesses, regions, and even countries concentrate on goods and services that they can produce better than anyone else Specialization improves productivity and efficiency; how? We all depend on others to produce the things that we consume Division of Labor: form of specialization, breaking down a job into separate, smaller tasks, which are preformed by other workers Most people specialize

Productivity on the Job Human capital: the sum of the skills, abilities, and motivation of people Productivity tends to increase when businesses invest in human capital; why? Improvement in human capital usually benefits business and individuals Due to specialization our economy is “interdependent”; risks and rewards Human capital, such as education, improves a country