CHapter 19 (OCHS-08-52's Conflicted Copy 2012-01-20)
description
Transcript of CHapter 19 (OCHS-08-52's Conflicted Copy 2012-01-20)
Goods- tangible things produced
Services- work preformed for someone else
Factors of production- resources necessary to produce goods and services› Natural resources› Labor› Capital
Manufactured goods used to make other goods and services
Satisfies wants indirectly› Entrepreneurs- individuals who starts a new
business, product, or improve processes
Gross Domestic Product- total value of all final goods and services produced in a country during a single year› Intermediate goods are not included
Standard of living- the quality of life based on the possession of necessities and luxuries that make life easier
GDP is only a matter of economic performance, it does not measure the overall well being of a society
NDP (Net Domestic Product)- takes GDP and subtracts the total loss in value of capital goods caused by depreciation
Market- free and willing exchange of goods and services
Market systems- flow is circular
The consumer sector Factor markets- the markets where
productive resources are bought and sold › Consumers earn their income› Workers earn wages, salaries, and tips in
exchange for labor› People who own land rent it› People that own capital exchange it for
interest
The Business Sector Product market- markets where
producers offer goods and services for sale› Sell goods and services to consumers› Businesses use the profit to pay for the
natural resources, labor, and capital they use
The business sector also purchases some of the output it uses› Capital goods- so that it can produce more
goods and services Tools Factories Etc.
The Government Sector All 3 levels of government Produces goods and purchases
productive inputs The government receives revenue from
the services it sells› Tuition› Fees› taxes
The Foreign Sector
› We sell and buy products from foreign markets
Promoting Economic Growth
Economic growth is a major goal of our economy› Improves our standard of living
Productivity- measure of the amount of output produced by a given level of input in a specific time
Specialization- concentrating on goods and services they can produce better than anyone else
Division of labor- breaking down a job into small tasks performed by different workers
Economic interdependence- we rely on others and others rely on us to provide goods and services
US economy built on Free markets and private ownership
Capitalism- an economic system in which private citizens own and use the factors of production in order to seek a profit
Free enterprise- competition is allowed to flourish with a minimum of government interference
Has been very successful for us
Markets- › prices are set› Exchange takes place› Can be local, regional, national or global› Factor markets v. product markets
Consumer sovereignty- “consumer is king” of the market. › They determine what is produced
Consumers have the right to choose which products they buy
Businesses have the right to choose the products that they will sell› Individuals must accept the consequences
of these two
Private Property rights- freedom to own and use, or dispose of, our own property as we choose as long as we do not interfere with the rights of others› Gives us the drive to work
Competition- struggle between buyers and sellers to get the best products at the lowest prices› Cost of production low and the quality of
goods high› Rewards the most efficient producers› Least efficient out of business
Profit- amount of money left over after all the costs of production have been paid
Profit Motive- the driving force that encourages individuals and organizations to improve their material well-being› Responsible for the growth of a free
enterprise system based on capitalism
Voluntary Exchange- act of buyers and sellers freely and willingly engaging in market transactions› Both buyer and seller should benefit
1776- Adam Smith- The Wealth of Nations› Life and trade of British society› Scientifically describes economic principles
for the first time› Founding fathers were influenced by Smith
Individuals left on their own will work for their own self-interest
“invisible hand”- would guide individuals
Laissez-faire economics- “to let alone”› Government should not interfere in the
marketplace› Government role is to keep competition