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Transcript
Factors of Production
Remember…….
 Goods: tangible products
 Services: work that is performed for someone else
Factors of Production
 Resources necessary to produce goods and services- natural resources, labor,
capital, and entrepreneurs
Land
- All natural resources use to produce goods and services
- Includes all material found in nature
- i.e. land, water, coal, forest, dirt, etc.
Labor
- human effort directed toward producing goods and services
- both physical and mental efforts
Capital
- any human made resource that is used to produce other goods and services
- physical capital: (capital good) human made objects that create other goods and
services…..machinery, buildings, tools, etc.
- save people time and money
- Benefits of physical capital: extra time, more knowledge, more productivity
- human capital: the knowledge and skills a worker gains through education and
experience
Entrepreneurs
- ambitious leaders who decide how to combine land, labor, and capital resources to
create new goods and services
- individuals who start new businesses, introduce new products, and improve
management techniques
- use factors of production to produce new products
Factors of Production
Remember…….
 _____________: tangible products
 _____________: work that is performed for someone else
Factors of Production
 Resources necessary to produce goods and services- ___________ ___________,
_____________, _______________, and ___________________
_____________
- All natural resources use to produce goods and services
- Includes all material found in ____________
- i.e. land, water, coal, forest, dirt, etc.
________________
- _________ effort directed toward producing goods and services
- both ________________ and _______________ efforts
Capital
- any ____________ made ______________ that is used to produce other goods
and services
- physical capital: (capital good) _________________________________________
______________________________________…..machinery, buildings, tools, etc.
- save people _______________ and _______________
- Benefits of physical capital: extra ________, more ________________,
more _______________________
- human capital: ___________________________________________________
__________________________________________________________________
Entrepreneurs
- ambitious ____________________ who decide how to _______________ land,
labor, and capital resources to create new _____________ and ________________
- individuals who start new __________________, introduce new _____________,
and improve ________________________ techniques
- use ____________________ _____ ___________________ to produce new
products
Gross Domestic Product
- the total value, in dollars, of all of the final goods and services produced in a
country during a single year
- measures that size and success of the economy
- the sale of used goods are NOT included in GDP
- products used to make the final good or services are not included in GDP
- to compute GDP: multiply the number of items produced and their average price
- if this years GDP is higher than last yearsthe economy is expanding
- if this years GDP is lower than last years the economy is declining
- GDP is an important measure of standard of living: the quality of life based on the
possession of necessities and luxuries that make life easier
- When GDP grows faster than the population, there are more goods and services,
on average, for each person to enjoy
- GDP measures quantity NOT quality
Economic Activity and Productivity, 19.2
The Circular Flow of Economic Activity
- The flow of resources, goods, services, and money in a market system is circular
The Consumer Sector
- Consumers earn income in factor markets: the markets where productive resources
are bought and sold. This is where workers earn wages, salaries, and tips in
exchange for their labor.
The Business Sector
- Individuals spend their incomes in product markets: markets where producers offer
goods and services for sale
- Businesses receive payments in the product markets and use these payments to
pay for natural resources, labor and capital
The Government Sector
- Made up of all 3 levels of government
- Produces goods and services such as national defense, health, education,
housing, transportation and purchases things from factor markets
- Government receives revenue from services it sells (i.e. tuition, bus fares) but
most comes from taxes
- Uses revenue to purchase final goods and services from the product markets
(i.e. schools purchase books, military purchases trucks)
The Foreign Sector
- we sell products to foreign countries and buy products from
foreign countries
Productivity and Economic Growth
- Growth in our economy occurs when our total output of goods and services
increases over time
Productivity
- A measure of the amount of output produced by a given amount of inputs in a
specific period of time
Specialization
- Takes place when people, businesses, regions, and even countries concentrate on
goods and services that they can produce better than anyone else
- Specialization improves productivity
- (i.e. you wouldn’t build a house yourself, you would use a carpenter, plumber,
electrician, etc)
Division of Labor
- the breaking down of a job into separate, smaller, tasks, which are performed by
different workers.
- this is a form of specialization that improves productivity
Human Capital
- the sum of the skills, abilities, and motivation of people
- make investment into employees to which increases productivity
Economic Interdependence
- we rely on others, and others rely on us to provide the goods and services that
we consume
- events in one nation impact other nations around the world