1. Economic Resources

2. Producing Goods and Services
The output or amount produced is in the form of goods (tangible products like computers and fingernail polish) and services (work that is performed by one for another like a manicure or a haircut)

3. Factors of Production
Resources necessary to produce goods and services
Natural resources
The gifts of nature that are used to make products
Before a product is transformed into something else
Examples: fertile soil, rainfall, minerals, forests, etc.

4. Labor
Nation’s labor force or human resource
Refers to both physical and mental efforts that people contribute to the production of goods and services
A resource that can vary in size depending on factors such as population growth, immigration, education, disease, and war
Examples: teachers, construction contractors, etc.

5. Capital
Also called capital goods
Anything used to make other products
Capital goods are unique in the fact that they are a result of production (someone has to actually make it; it can not be found in nature)
Examples: tools, machinery, buildings
Consumer goods satisfy wants directly
Examples: computers, cars, foods, etc.
Capital goods satisfy wants indirectly by producing consumer goods

6. Entrepreneur
Individuals who start new businesses, introduce new products, and improve management techniques
Involves being innovative and taking risks in order to profit
Often thought of as the driving force of the American economy because they use the factors of production to create new products

7. Question
You will write a short paragraph explaining the major functions of the entrepreneur? It must be in complete sentences.

8. Gross Domestic Product
The measure of economic success by the amount of their income and their ability to provide for themselves and their family
Also called GDP
The total value in dollars of all the final goods and services produced in a country in a single year
A final good is the good that is sold to the consumer; intermediate goods are the goods that go into making the final good
Example: final good- car intermediate good- steel

9. The intermediate goods are not calculated in the GDP- only the final goods and services are calculated by economists
If they counted both intermediate and final goods, they would be double counting or counting a good more than once
Secondhand sales are not counted as part of GDP because no new production is created: Example: the selling and buying of a used car between two people

10. Measuring GDP
A monetary measure used to compare the number of goods and services produced to get the relative worth
To compute GDP:
Multiply the number of items produced by the average price of the item
Add the multiple items together
Example: 2,000 cars sold at average $35,000
5,000 trucks sold at average $55,000
3,500 SUVs sold at average $42,000
GDP: Cars $70,000, Trucks $275,000,000 + $147,000,000
GDP = $492,000,000

11. If the GDP is higher than in the previous year, then the economy is expanding
If the GDP is lower than the previous year, then the economy is declining
Economists use GDP figures to analyze business cycle patterns
GDP is an important measure of the standard of living
-whenever GDP grows faster than the population, there are more goods and services, on average, for each of us to use
GDP is a reasonable accurate and useful measure of economic performance, but not a measure of society’s overall well-being

12. Quantity vs Quality GDP measures quantity not quality
GDP does not accurately reflect improvements in the quality of products
Example: A car purchased today at $45,000 is not the same as a car costing the same amount 5 years ago- the car purchased 5 years ago at the same cost was probably better

13. Review Questions How do economist define natural resources?
Is a pizza oven a capital good or consumer good? Explain.
Under what factor of production would you classify a bull dozer?
Under what factor of production would you classify oil?
What does Gross Domestic Product measure?
What does Gross Domestic Product not measure?