Basic Economic Concepts

Goods, Services, and Consumers GOODS- A good is an economic product: a useful, tangible thing. When manufactured goods are used to create other goods they are CAPITAL GOODS. Goods for final use by people are CONSUMER GOODS. Durable vs. Nondurable goods: Durable goods last three years or more when used consistently; nondurable last less than three years. SERVICES- Services are another type of economic product. A service (or work) is performed for someone. What’s the difference between a good and a service? CONSUMERS- Consumers are the people who use the goods and services to fulfill their needs and wants.

Value, Utility, and Wealth UTILITY- Utility means that something is useful and provides satisfaction. Utility does not have a set value, and changes from one person to another. VALUE- For something to have monetary value it must be scarce AND have utility. WEALTH- In terms of economics wealth consists of the accumulation of products that are scarce, useful, and transferable from one person to another. Nation’s wealth- is made up of tangible items (natural resource, stores, furniture etc) that can be exchanged. GOODS are counted as wealth, SERVICES are not.

Markets MARKET- a location or other mechanism that allows buyers and sellers to exchange a specific product. FACTOR MARKETS- Individuals earn their incomes in factor markets, where the factors of production are bought and sold. PRODUCT MARKETS- Product markets are where individuals spend their money. Product markets are where PRODUCERS sells their goods and services. The money people make in the factor markets is then returned to businesses in the product market.

Productivity and Economic Growth Economic Growth- This happens when a nation’s output of goods and services increases over time. PRODUCTIVITY- Productivity is when scarce resources are used efficiently. Meaning productivity goes up when more can be produced using the same amount of resources. HUMAN CAPITAL- Human capital is people’s skills, abilities, health, knowledge, and motivation. DIVISION OF LABOR- organizing work so that each individual worker completes a separate part of the work. SPECIALIZATION- when people perform tasks only they can do more efficiently than others. ECONOMIC INTERDEPENDENCE- This means our economy relies on others, and others rely on us, to provide most of the goods and services we consume.