Chapter 1.2 notes Basic concepts and key terms

Types of Economic Products goods and services that are useful, relatively scarce, and transferable to others goods – economically useful (book, car, cd player) consumer good – intended for final use by individual capital good- manufactured goods that are used to produce other goods and services (oven in a bakery, computer in a h.s.)

cont’d service- work performed for someone (haircuts) consumer – a person who uses goods and services to satisfy wants and needs

Value, Utility and Wealth value- worth expressed in $ or cents. *for something to have value, it must have: utility – capacity to be useful and provide satisfaction; the utility of a good or service may vary from one person to next. * a good must have scarcity and utility to have value wealth – accumulation of those products that are tangible, scarce, useful, and transferable from one person to another. Services are not counted in wealth.

Circular Flow of Economic Activity Incomes are earned in factor markets – where productive resources are bought and sold, including labor sold to an employee. Product markets – where people spend their $ on goods and services. Businesses spend the $ received to produce more goods and services and the cycle continues.

Productivity and Economic Growth productivity – measure of amount of output produced by a given amount of inputs in a specific period of time; most important factor in economic growth. Division of labor can help productivity Specialization – happens when factors of production perform tasks that they can do relatively more efficiently than others (Idaho and potatoes)

Investing in human capital – sum of the skills, abilities, health, and motivation of people. Example: gov’t provides education and health care Economic Interdependence – relying on others and vice versa to provide goods and services Example: baseball strike