Economic Resources Economics Pt. 1, Sec. 3

Goods and Services Production in an economy is divided between goods and services Goods are tangible products like books, clothes, toys Services are work that is performed for someone else such as haircuts, car repair, teaching Most people in America provide services to other people. “service economy” Car=good Repair=service

Factors of Production Four factors, called “factors of production,” are necessary to produce goods and services: natural resources, labor, capital, and entrepreneurs Natural Resources: refers to the gifts of nature such as fields, water, minerals, trees that we use to make products Labor is the nation’s human resources both physical and mental Advanced economies such as found in the United States have a greater demand for mental labor than physical labor Natural Resources are important to countries

Factors of Production Capital: also called capital goods; tools, machinery, and buildings used to make other products Capital goods vs. consumer goods; consumer goods satisfy wants directly, capital goods satisfy wants indirectly Entrepreneurs: individuals who start new businesses, introduce new products, and improve management techniques Entrepreneurs take risks but they can become very wealthy or lose everything; very important to the economy Mark Zuckerberg, the creator of Facebook

Gross Domestic Product Gross Domestic Product (GDP): total values of all the final goods and services produced in the country during a single year; bread? used products? If a countries GDP increases over the previous years then the economy is expanding, if its lower the economy is declining Standard of Living: quality of life, when GDP grows faster than the population life improves GDP only measures quantity, not quality; effect on Standard of Living? Why does increased GDP improve Standard of Living?