Economics: Chapter 1

GDP

(Gross Domestic Product) Dollar value of all final goods, services, and structures produces within a country's borders in a 12 month period, in a country. If GDP is growing, economic health is good.

Market Economy

A market economy is an economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's individual citizens and businesses. There is little government intervention or central planning.

Services

A non-physical action that is paid for

Durable Good

Anything that can be used and is useful for more than three years.

Capitalism

Capitalism is an economic system and an ideology based on private ownership of the means of production and their operation for profit.

Economic Interdependence

Economic independence is the control of the wealth of a nation by a majority of its citizens. Thus, in any context, Economic Independence means local ownership of resources and the means of production for the utilization of natural wealth (aka our natural resources)

Why do we study economics?

Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people. Indeed, economics is an important subject because of the fact of scarcity and the desire for efficiency.

Adam Smith

Father of Capitalism (Created Paradox of Value)

Consumer Good

Goods intended for final use by individual consumers.

Capital Goods

Manufactured goods used to produce other goods and services.

Economic Growth

Nations growth over time (GDP) due to Productivity, investing in human capital, Division of labor, specialization, and economic independence.

Opportunity Cost

Next best option that is given up to pursue the best option

Goods

Physical purchasable items

Factors of Production

Resources required to produce wanted things. Land, Labor, Capital, Entrepreneurs.

Paradox of Value

Scarce resources cost more than items that we have more of

Need

Something you need to obtain

Want

Something you would like to obtain, second to need

Invisible Hand

The unobservant market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand.

Scarcity

key to what economists try to predict- biggest question in economy

Non-Durable Good

lasts for fewer than three years.

Division of Labor

the assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.

What is Economics?

the branch of knowledge concerned with the production, consumption, and transfer of wealth. The condition of a region or group as regards material prosperity.

Specialization

the process of concentrating on and becoming expert in a particular subject or skill.

Economy

the wealth and resources of a country or region, especially in terms of the production and consumption of goods and services.