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Human Capital and
Capital Goods
Describe factors that influence
economic growth and examine their
presence or absence in Europe
What is Human Capital?
• Training and education by taking classes
and/or job experience that increases a
persons value in the work place.
• Intelligence or physical skill
• Training increases productivity
• People with more education earn more $$
• What are some examples of investing in
Human Capital?
• Teachers invest in human capital
Who would make more money each year:
a doctor or a data entry worker?
• What would explain this?
• Amount of education or investment in human
• The doctor is required 8+ years of education
after high school and earns $200,000 (average)
• With data entry, only a high school degree is
required. The average salary being $26,000.
Capital Goods
• Capital goods are tools used in the production of
other goods.
• Some examples are factories, machinery, tools,
• Capital goods are also any raw materials used
to manufacture goods and services.
• Money is NOT a resource – Money is a means
or medium of exchange
– Money is not worth anything by itself, its value is what
we can exchange the money for.
Factors of Production
1. Natural Resources –or land that has all the gifts of nature including:
– mineral deposits, water, arable land, vegetation, natural forests,
marine resources, other animal life, the atmosphere and the
sun. Minerals are a limited, non-renewable resource
2. Labor - (Human capital)
– Quality
(knowledge) is better than quantity
3. Capital goods- items used to create goods & services
Entrepreneurship – innovators (creating new products)
– The entrepreneur is the driving force behind production.
– Entrepreneurs introduce new products and new techniques
– Risk takers- the people who take chances. They do this
because they anticipate that they will make profits. But they may
also suffer losses and perhaps bankruptcy.
Gross Domestic Product or GDP
• Gross Domestic Product (GDP) is the
value, expressed in dollars, of all final
goods and services produced in a year.
– Goods are things that we use, touch and see
– Services are activities people do for us.
– The production of these goods and services
provides jobs for people in the economy.
– The income people earn is then used to
consume goods and services.