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ECON 102 Lecture Notes - Income Approach, Unemployment Benefits, Public Health

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periwinkledeer44
11 Feb 2013
School
UBC
Department
Economics
Course
ECON 102
Professor
Lanny Zrill

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ECON 102 Full Course Notes
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ECON 102 Full Course Notes
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Document Summary

The measurement of national income is central to our understanding of the level of economic activity. We can measure national income indirectly by measuring how much is produced in the economy. However, it is not as simple as just measuring the value of the output of all firms. This would lead to the problem of double counting. Measuring production as a means of measuring income. Consider the contribution of a load of bread to our measure of production . This includes the sale of wheat to the mill, the sale of flour to the baker, and finally the sale of bread to the consumer. If we add up the value of the output for all three transactions then we will overestimate (double count) the level of production. Instead, we should focus not on the sale price of the good, but rather the value added at each stage of production (value added approach) Value added = revenue cost of intermediate goods.

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Related Questions

What is the market for factors of production?

  1. What is the market for factors of production?

    1. The market for factors of production is where households and firms interact to trade factors of production for factor payments. For example this is where people provide firms with labor and firms pay them with wages. 

  2. What is the money market?

    1. The money market is where households, firms, and the government may save and/or invest their money to earn interests. Money market includes banks, stock market, bonds market, and other financial institutions where economic actors can buy and sell financial assets to earn interests and/or dividends.

  3. Who are the three economic actors in the circular flow model?

    1. In a circular flow model, the three main economic actors are the households, firms, and the government. Households include the typical individual consumers. Firms include businesses and similar producers in the economy. Finally, the government refers to the whole government system from federal to local level.

  4. How is the national income of an economy determined?

    1. The national income of an economy is determined by measuring the total value of the output produced in an economy or the total income earned by the actors in the economy. In a circular flow model, we can see that the value of total output produced should equal the total value of income generated and earned in the economy. This is because every dollar spent by someone in the economy is received by another person in the economy as income.

  5. What is GDP?

    1. The gross domestic product or GDP represents the sum total of the value of the final goods and services produced within the economy for a given year. It is the most commonly used measure of its economy’s productivity and income.