Chapter 19-The American Economy

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know dif. between goods and services

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pg 424

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Four factors of production
def and what they are

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resources necessary to produce goods and services

1. Natural resources
2. Labor
3. Capital
4. Entrepreneurs

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Natural rescources

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-one factor of production
-refers to all of the "gifts of nature"
-ex: fertile fields ,abundant rainfall, forests , mineral deposits and other resources we use to make products.

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Labor

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-one factor of production
-Labor refers to both physical and mental efforts that people contribute to the production of goods and services.
-Varies in size over time

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Capital

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-one factor of production
-also called capital goods
-These are the tools, machinery , and buildings used to construct ur school buildings included bulldozers , trucks , hammers, saws , drills , and any other human-made instruments of production that were used during its construction.
-Capital goods are unique in that they are the result of production

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Entrepreneurs

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-one factor of production
-These are the indivduals who start a new business , introduce new products and improve management techniques.
-Often thought of as the driving force in the American economy b/c they use the factors of producution to produce new products

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GDP

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-Gross Domestic Product
-One measure of the economy's size
-This is the total value in dollars of the final goods and services produced in a country during single yr.
-Secondhand sales not included
-Gdp is a monetary measure
-an important measure of the standard of living

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GDP is an important measure of the Blank and Blank

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standard of living and the success of the economy and size of the economy.

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Standard of Living

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-GDP is a measure of this
-The quality of life based on the possession of necessities and luxuries that make life easier.

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GDP is not a measure of :

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-Measure of society's overall well being

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Factor Markets

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the markets where productive resources are bought and sold.
Here workers earn wages , salaries , and tips in exchange for labor

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Product Markets

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Markets where products offer goods and services for sale.

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What does the circular flow of economic activity show? pg 429

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the relationship between different economic sectors

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Productivity

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Measure of the amt of output produced by a given amount of inputs in a specific period of time.
Productivity goes up whenever more output can be produced with the same amt of inputs in the same amt of time or when the same output can be produced with less input.

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Specialization

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-take place when people ,businesses , regions , and even countries concentrate on goods and services that they can produce better than anyone else.
-Specialization is important because it increases productivity.

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Division of Labor

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-The breaking down of a job into seperate , smaller tasks which are performed by different workers
-form of specialization that improves productivity

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Human Capitol

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The sum of the skills, abilities , and motivation of people.

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Economic Interdependence

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A reliance on others , as they rely on you , to provide goods and services to be consumed.

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Adam Smith

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-an Scottish philosopher and economist
-Wrote the wealth of nations

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Consumer Sovereignty

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The rule of consumer as the ruler of the market, determining what products will be produced.

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Economic Freedom

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-As consumers we have he right to choose the products we buy
-Businesses have the right to choose the products they will produce and offer for sale.

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Private Property Rights

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-Means we have the 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.

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Competition

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-the struggle that goes on between buyers and sellers to get the best product at the lowest price.

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Profit Motive

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-The driving force that encourages individuals and organizations to improve their material well-being

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profit

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the amt of money left over after all the costs of production have been paid.

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Voluntary Exchange

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-the act of buyers and sellers freely and willingly engaging in market transactions.

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The features of Capitalism :

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1.Consumer Sovereignty
2.Economic Freedom
3.Private Property Rights
4.Competition
5.Profit Motive
6.Voluntary Exchange