Transcript Economic Resources

Economic Resources
Producing Goods and Services
• The output or amount produced is in
the form of goods (tangible products
like computers and fingernail polish)
and services (work that is performed
by one for another like a manicure or
a haircut)
Factors of Production
• Resources necessary to produce goods and services
1. Natural resources
• The gifts of nature that are used to make products
• Before a product is transformed into something else
Examples: fertile soil, rainfall, minerals, forests, etc.
2. Labor
• Nation’s labor force or human resource
• Refers to both physical and mental efforts that
people contribute to the production of goods and
services
• A resource that can vary in size depending on
factors such as population growth, immigration,
education, disease, and war
• Examples: teachers, construction contractors, etc.
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Capital
Also called capital goods
Anything used to make other products
Capital goods are unique in the fact that they are a
result of production (someone has to actually make
it; it can not be found in nature)
Examples: tools, machinery, buildings
Consumer goods satisfy wants directly
Examples: computers, cars, foods, etc.
Capital goods satisfy wants indirectly by producing
consumer goods
4. Entrepreneur
• Individuals who start new businesses, introduce
new products, and improve management
techniques
• Involves being innovative and taking risks in order
to profit
• Often thought of as the driving force of the
American economy because they use the factors of
production to create new products
Question
You will write a short paragraph explaining
the major functions of the entrepreneur?
It must be in complete sentences.
Gross Domestic Product
• The measure of economic success by the amount of their
income and their ability to provide for themselves and their
family
• Also called GDP
• The total value in dollars of all the final goods and services
produced in a country in a single year
• A final good is the good that is sold to the consumer;
intermediate goods are the goods that go into making the
final good
• Example: final good- car intermediate good- steel
• The intermediate goods are not calculated in the
GDP- only the final goods and services are calculated
by economists
• If they counted both intermediate and final goods,
they would be double counting or counting a good
more than once
• Secondhand sales are not counted as part of GDP
because no new production is created: Example:
the selling and buying of a used car between two
people
Measuring GDP
• A monetary measure used to compare the number of goods
and services produced to get the relative worth
• To compute GDP:
1. Multiply the number of items produced by the average
price of the item
2. Add the multiple items together
Example: 2,000 cars sold at average $35,000
5,000 trucks sold at average $55,000
3,500 SUVs sold at average $42,000
GDP: Cars $70,000,000 + Trucks $275,000,000 + $147,000,000
GDP = $492,000,000
• If the GDP is higher than in the previous year, then the
economy is expanding
• If the GDP is lower than the previous year, then the economy
is declining
• Economists use GDP figures to analyze business cycle patterns
• GDP is an important measure of the standard of living
-whenever GDP grows faster than the population, there are
more goods and services, on average, for each of us to use
• GDP is a reasonable accurate and useful measure of
economic performance, but not a measure of society’s overall
well-being
Quantity vs Quality
• GDP measures quantity not quality
• GDP does not accurately reflect improvements in the
quality of products
• Example: A car purchased today at $45,000 is not the
same as a car costing the same amount 5 years ago- the
car purchased 5 years ago at the same cost was probably
better
Review Questions
• How do economist define natural resources?
• Is a pizza oven a capital good or consumer good?
Explain.
• Under what factor of production would you classify
a bull dozer?
• Under what factor of production would you classify
oil?
• What does Gross Domestic Product measure?
• What does Gross Domestic Product not measure?