1. Splash Screen

2. Section 2-Key Terms Chapter 1 Section 2 Basic Economic Concepts productivity human capital division of labor specialization economic interdependenceeconomic interdependence

3. Section 2-Key Terms Content Vocabulary good consumer goodconsumer good durable good nondurable goodnondurable good service value paradox of valueparadox of value utility wealth market factor market product market economic growth productivity human capital division of labor specialization economic interdependenceeconomic interdependence

4. Section 2-Key Terms Academic Vocabulary transferable accumulation mechanism

5. Section 2 Goods, Services, and Consumers Economic products are goods or services that are useful, relatively scarce, and transferable.

6. Section 2 Goods, Services, and Consumers (cont.) Economics is concerned with economic products—goods and services that satisfy our wants and needs. They command a price because they are scare and useful.

7. Section 2 Goods, Services, and Consumers (cont.) There are different economic products that consumers use. –A good is a useful, tangible item.good Capital goods are manufactured goods used to produce other goods and services. –Consumer goodConsumer good –Durable goodDurable good

8. Section 2 Goods, Services, and Consumers (cont.) –Nondurable goodNondurable good –Service is a work performed for someone.Service

9. Section 2 Value, Utility, and Wealth The value of a good or service depends on its scarcity and utility.

10. Section 2 In economics, value refers to worth that can be expressed in dollars and cents.value Adam Smith, a Scottish social philosopher, came up with the term paradox of value in 1776.paradox of value Value, Utility, and Wealth (cont.)

11. Section 2 Scarcity by itself does not fully explain how value is determined. For a good or service to have value, it must also have utility, which varies by person.utility Value, Utility, and Wealth (cont.)

12. Section 2 A nation’s wealth is comprised of all tangible goods.wealth This, however, does not mean that services are not useful or valuable. Value, Utility, and Wealth (cont.)

13. Section 2 The Circular Flow of Economic Activity The economic activity in markets connects individuals and businesses.

14. Section 2 The circular flow of economic activity generates wealth. The market is the key to this circular flow.market Individuals earn their incomes in factor markets.factor markets The Circular Flow of Economic Activity (cont.) The Circular Flow of Economic Activity

15. Section 2 After individuals earn their incomes in factor markets, they spend it in product markets.product markets Businesses then use this money to produce more goods and services. This cycle of economic activity repeats. The Circular Flow of Economic Activity (cont.)

16. Section 2 Productivity and Economic Growth A nation’s economic growth is due to several factors.

17. Section 2 When the circular flow becomes larger, with more factors of production, goods, and services flowing in one direction and more payments in the opposite direction, there is economic growth.economic growth –Productivity is the most important factor contributing to economic growth.Productivity Productivity and Economic Growth (cont.)

18. Section 2 Ways to increase productivity –Invest in human capital such as education, training, and health-carehuman capital –Division of labor and specializationDivision of laborspecialization Productivity and Economic Growth (cont.) Effect of Education on Income Profiles in Economics: Adam Smith

19. Section 2 The U.S. economy has a remarkable degree of economic interdependence. As a result, events in one part of the world may have a dramatic impact here.economic interdependence Productivity and Economic Growth (cont.)