Econ Ch. 2 Notes - Essential Foundations of Economics.pdf

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Course Code
ECON 203
Richard Coe

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Econ Ch. 2 Notes - Goods/services: - consumption goods + services - capital goods - government goods + services - export goods + services - Consumption goods + services - items that are bought by individuals + used to provide personal enjoyment and contribute to a person’s quality of life. Ex. Housing, SUVs, vitamin water, movies, dental services, downhill skiing lessons. - capital goods - goods that are bought by businesses to increase their productive resources. Ex. Assembly lines, shopping malls, airplanes, oil tankers. - government goods and services - Items that are bought by governments. Ex. Missiles, weapon systems, travel services, Internet services, police protection, roads, paper, paper clips. - export goods and services - Items that are produced in one country and sold in other countries. Ex. U.S. export goods + services include the airplanes produced by Boeing that Singapore Airlines buys computers produced by Dell that Europeans buy, 1 censes sold by U.S. film companies to show U.S. movies in European move theaters. - consumption goods + services have the largest share and a share that doesn’t fluctuate much. - The volume of capital goods produced fluctuates as the economy cycles from boom to recession. - Goods + services bought by governments are close to a fifty of total production and export goods around one tenth. - goods + services, smaller categories (health services 13%) real estate 12%. Then education, then retail and wholesale trades + transportation + storage. - goods (construction 5%) utilities, food, chemicals each account for 2% or less. - Goods and services are produced by using productive resources. Economists call the productive resources factors of production. - factors of production - the productive resources that are used to produce goods and services - land, labor, capital, and entrepreneurship. - land - The “gifts of nature” or natural resources, that we use to produce goods and services. - Land includes land in the everyday sense, minerals, energy, water, air, and wild plants, animals, birds, and fish. Some resources are renewable, some aren’t. - The U.S. Geological Survey maintains a national inventory of the quantity + quality of natural resources + monitors changes to that inventory. - U.S. covers 2 billion acres. 45% of the land is forest, lakes, national parks. 50% is used for agriculture, 5% urban. Urban land is growing, agricultural land is shrinking. - Labor - the work time and work effort that people devote to producing goods + services. Labor includes the physical + mental efforts of all the people who work on forms and construction sites and in factories, shops, and offices. - The Census Bureau and Bureau of Labor Statistics measure the quantity of labor at work every month. - Quantity of labor increases as the adult population increases. - Quantity of labor increases if a larger percentage of the population takes jobs. - The quality of labor depends on how skilled people are. - human capital - the knowledge and skill that people obtain from education, on-the-job training, and work experience. - Human capital improves the quality of labor and increase the quantity of goods and services that labor can produce. - capital - consists of the tools, instruments, machines, buildings, and other items that have been produces in the past and that businesses now use to produce goods + services. Ex. screw drivers, computers, auto assembly lines, office towers, dams, power plants, airports, shirt factories, shopping malls. - Capital also includes inventories of unsold goods or of partly finished goods on a production line. - Capital includes infrastructure capital - high ways + airports. - Human capital makes labor more productive. - The Bureau of Economic Analysis in the U.S. Department of Commerce keeps track of the total value of capital in the U.S. and how it grows over time. - Financial capital - not productive resources, money, stocks, bonds. They enable people to provide businesses with financial resources, they are not used to produce goods and services. They are not capital. - entrepreneurship - the human resource that organizes labor, land, and capital to produce goods and services. - Who gets goods + services depends on incomes of people. - rent income paid for the use of land. - wages - income paid for the services of labor. - interest - income paid for the use of land. - profit (or loss) - income earned by an entrepreneur for running a business. - functional distribution of income - the distribution of income among the factors of production. - personal distribution of income - the distribution of income among households. - advanced economics - Richest 2% countries (or areas). 1 billion (15% of the world’s population) live in advanced economics. - emerging market economies are the 28 countries in Central + Eastern Europe + Asia that were until the early 1990s part of the Soviet Union or are of its satellites. - Russia is the largest of these economies. - Almost 500 million people live in these countries - only about half of the number in the advanced economies. These countries are important because they’re emerging from a system of state-owned production, central economic planning, and heavily regulated markets to a system of free enterprise and unregulated markets. - Developing economies are the 118 countries in Africa, Asia, and the Middle East, Europe, and central and South America that have not yet achieved high average incomes for their people. - More than 5 billion people - almost four out of every five people - live in developing economies. - Pie chart pg. 42 - good example of the global economy. - energy - oil, natural gas, coal are non-renewable. - At the current rate our world’s oil will last for about 40 years, gas 60 years, coal 200 years. - Wind + solar provide 2% of the world’s electricity. - food - large part of developing economies. Advanced economies produce 1/3 of world’s food. Total production is much larger in advanced economies than in developing economies. - Energy sources in the world economy pie charts pg. 43. - What is produced in the developing economies contrasts sharply with that of the advanced economies. - Each country or region has its own blend of land, labor, and capital. - Education differences. - Advanced economy, amount of capital available for producing goods and services. - Transportation system - connects highways/cities. - The more advanced the economy, the greater are the amount + sophistication of the capital equipment used in production. - Personal distribution of income - uneven. - International distribution - in
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