Chapter 1 lesion 1 terms

A need

A need is a basic requirement for survival, such as food, clothing, and shelter.

Economics

Economics is the study of how people try to satisfy seemingly unlimited and competing needs and wants through the careful use of relatively scarce resources.

Comprehensive

GDP is the most comprehensive measure of a country's total output and a key measure of a nation's economic health. Economics also describes jobs, prices, trade, taxes, and government spending.

Value

Most goods and services have something called value, a term that refers to a worth that can be expressed in dollars and cents. But

Gross domestic product (GDP)

One part of economics describes economic activity. For example, we often hear about gross domestic product (GDP)—the monetary value of all final goods, services, and structures produced within a country's borders in a 12-month period

Scarcity

Scarcity is the condition that results from society not having enough resources to produce all the things people would like to have

Service

The other type of economic product is a service, or work that is performed for someone. Services include haircuts, home repairs, and forms of entertainment such as concerts

The paradox of value

This contradiction was called the paradox of value. Adam Smith, our earliest economist, was one of the first to explain the essence of value in his famous book The Wealth of Nations, which was published in 1776.

Utility

Utility is not something that is fixed or even measurable, like weight or height. Instead, the utility of a good or service may vary from one person to the next.

A Want

Want is simply something we would like to have but is not necessary for survival. Food, for example, is needed for survival.

Wealth is the accumulation

Wealth is the accumulation of products that are tangible, are scarce, have utility, and are transferable from one person to another.

Intangible

While goods are counted as wealth, services are not, because they are intangible. However, this does not mean that services are not useful or valuable. Indeed, when Adam Smith published his famous book The Wealth of Nations in 1776, he was referring specifically to the abilities and skills of a nation's people as the source of its wealth.

•A capital good

•A capital good is a tool or good such as machinery or equipment that is used by businesses to produce other products.

•A consumer good

•A consumer good is a good intended for final use by individuals, such as shoes, a shirt, or an automobile.

•A durable good

•A durable good is one that lasts three years or more when used on a regular basis. Durable goods include tools such as robot welders and tractors, and consumer goods such as automobiles.

•A nondurable good

•A nondurable good is an item that lasts for fewer than three years when used on a regular basis. Food, writing paper, and most clothing items are examples of nondurable goods.