Wants - Simply the desires of citizens. Wants are
different from needs as we will see below. Wants are a means of
expressing a perceived need. Wants are broader than needs.
Needs: These are basic requirements for survival like food
and water and shelter. In recent years we have seen a percieved
shift of certain items from wants to needs. Telephone service, to
many, is a need. I would argue, however, that they are wrong.
Scarcity - the fundemental economic problem facing ALL
societies. Essentially it is how to satisfy unlimited wants
with limited resources. This is the issue that plagues all
governmet and peoples. How do we conquor the issue of scarcity?
Many people have thoaught they had the answer (see Marx, Smith,
Keynes, etc.) but the issue of scarcity still exists.
Factors of Production/Resources - these are those elements
that a nations has at its disposal to deal with the issue of
scarcity. How efficiently these are used determines the measure of
success a nation has. They are
- Land - natural resources, etc.
- Capital - investment monies.
- Labor - the work force; size, education, quality, work ethic.
- Entrepreneurs - inventive and risk taking spirit. This is a
rather new addition to a tradirtional list.
The "Three Basic Economic Questions" - these are the
questions all nations must ask when dealing with scarcity and
effcientlly allocating their resources.
- What to produce?
- How to produce?
- For whom to produce?
Economics - Economics is the study the production and
distribution of goods and services, it is the study of human efforts
to satisfy unlimited wants with limited resources.
Opportunity Cost - the cost of an economic decision. The
classic example is "guns or butter." What should a nation produce;
butter, a need, or guns, a want? What is the cost of either decsion?
If we choose the guns the cost is the butter. If we choose butter,
the cost is the guns. nations bust always deal with the questions
faced by opportunity cost. It is a matter of choices. Resources are
limted thus we cannot meet every need or want.
Free Products: Air, sunshine are and other items so
plentiful no one could own them.
Economists are interested in "economic products" - goods
and services that are useful, relatively scarce and transferable.
Good: tangible commodity. These are bought, sold, traded
Consumer Goods: Goods that are intended for final use by
Capital Goods: Items used in the creation of other goods.
factory machinary, trucks, etc.
Durable Goods: Any good that lasts more than three years
when used on a regular basis.
Non Durable Goods: Any item that lasts less than 3 years
when used on a regular basis.
Services: Work that is performed for someone. Service
cannot be touched or felt.
Consumers: people who use these goods and services.
Conspicuous Consumption: Use of a good or service to
Value: An assignment of worth. The assignment is usually
based upon the utility (usefulness) or scarcity of the item (supply
Utility: capacity to be useful.
Paradox of value: assignment of the highest value to
those things we need the least, like water and the highest things we
often don't need at all like diamonds. Why do we do this? Good
question. I do not have an answer.
Wealth: the sum collection of those economic products that
are tangible, scarce and useful.
Productivity - the ability to produce vast amounts of goods
(economic products) in an efficient manner. The American capilist
economy is productive because:
- We use our resource efficiently.
- We specialize to increase efficiency and productivity.
- We invest in Human Capital (our labor pool)
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