1.2 Basic Economic 1.

2 Basic Economic Concepts Concepts

What s the concept?

I. Goods, Services, and Consumers

- Economic products are goods or services that are useful, relatively scarce, and transferable. - Because of that, they command a price.

I. Goods, Services, and Consumers (cont.)

! A good is a useful, tangible item.

! Capital goods are manufactured goods used to produce other goods and services. - Durable good goods that lasts >3 yrs - Nondurable good goods that lasts <3 yrs ! Service is a work performed for someone.

Which do you consume or indulge in more often? A. Goods B. Services

Group Activity
Durable Goods Nondurable Goods Services

1.! List the goods and services that your group uses as consumers under the relevant heading. 2.! For each durable and nondurable good, circle items that are capital goods. 3.! Draw a square around items that are consumer goods.

Name! Date! Period! Questions/Cues! Notes:! 1.2 Basic Economic Concepts I.! Goods, Services, and Consumers! ! - Economic products are goods or services that are useful, relatively scarce, and transferable. ! - Because of that, they command a price.! ! A good is a useful, tangible item. ! ! Capital goods are manufactured goods used to produce other goods and services.! - Durable good goods that lasts >3 yrs! - Nondurable good goods that lasts <3 yrs! ! Service is a work performed for someone. ! II. Value, Utility, and Wealth!

I. Value, Utility, and Wealth

The value of a good or service depends on its scarcity and utility. ! value refers to worth that can be expressed in dollars and cents. ! Adam Smith, a Scottish social philosopher, pointed out ! paradox of value contradiction of high value and low value items

II. Value, Utility, and Wealth (cont.)

! For a good or service to have value, it must also have utility. (Is it useful? Does it satisfy?) ! A nation s wealth is comprised of all tangible goods. ! This, however, does not mean that services are not useful or valuable.

Which of the following has the most value and utility to your family? A. Automobile B. Kitchen appliances C. Television

Name! Date! Period! Questions/Cues! Notes:! 1.2 Basic Economic Concepts II. Value, Utility, and Wealth ! The value of a good or service depends on its scarcity and utility.! ! value refers to worth that can be expressed in dollars and cents.! ! Adam Smith, a Scottish social philosopher, pointed out! ! paradox of value contradiction of high value and low value items! III. Circular Flow of Economic Activity!

III. The Circular Flow of Economic Activity

The economic activity in markets connects individuals and businesses. ! The circular flow of economic activity generates wealth.

This is where goods and services are bought and sold.

This is where the factors of production are bought and sold.

Name! Date! Period! Questions/Cues! Notes:! 1.2 Basic Economic Concepts III. The Circular Flow of Economics Activity ! The economic activity in markets connects individuals and businesses.! ! The circular ow of economic activity generates wealth.! IV. Productivity and Economic Growth!

IV. Productivity and Economic Growth

A nation s economic growth is due to several factors. ! When the circular flow becomes larger, there is economic growth. ! Productivity is the most important factor contributing to economic growth. HOW DO WE INCREASE PRODUCTIVITY? 1. Invest in human capital such as education, training, and health-care

2.! Division of labor 3.! specialization

Productivity and Economic Growth (cont.)

4. economic interdependence. events in one part of the world impacts another part.

Which investment we make today will generate higher returns in the future? A. Education B. Health-care C. Technology

Name! Date! Period! Questions/Cues! Notes:! 1.2 Basic Economic Concepts IV. Productivity and Economic Growth! A nation s economic growth is due to several factors.! ! When the circular ow becomes larger, there is economic growth.! ! Productivity is the most important factor contributing to economic growth.! HOW DO WE INCREASE PRODUCTIVITY?! 1. Invest in human capital such as education, training, and health-care! 2.! Division of labor 3. specialization! 4. economic interdependence. !