Ch 1 Sec 2: Goods & Services

Section 2: Goods & Services

Key Vocabulary
good consumer good
capital good service
value paradox of value
utility wealth
market factor market
product market economic growth
productivity division of labor
specialization human capital
economic interdependence

Goods
• items that are economically useful or satisfy an economic want.
• tangible (can be touched)
• can be classified as consumer/capital and durable/ nondurable

Services
• Services are work performed for someone and are intangible.

Consumers use goods and services to satisfy wants and needs
Goods & Services have value, utility, and wealth

Value
• worth expressed in dollars and cents.
• Scarcity by itself is not enough to create value.
• For something to have value, it must also have utility.

Utility
• a good’s or service’s capacity to provide satisfaction, which varies with the needs and wants of each person.
• The utility of a product varies based on who’s looking at it.

Wealth
• the accumulation of goods that are tangible, scarce, useful, and transferable to another person. Wealth does not include services.









Circular Flow: Economic Activity

Markets
A way for buyers and sellers to trade. Can be local, regional, national, global, and cyberspace.
factor market: where people earn their incomes; center on the four factors of production: land, capital, labor, and entrepreneurs.
product market: where people use their income to buy from producers. Product markets center on goods and services

Productivity
• a measure of the amount of output produced by the amount of inputs within a certain time. Productivity increases with efficient use of scarce resources.
• Specialization and division of labor may improve productivity because they lead to more proficiency (and greater economic interdependence).

How to increase productivity
• Specialization: focusing on only one good/service or type of good/service
• division of labor: breaking up the work
• Investing in workers’ skills, abilities, health, and motivation
• interdependence—reliance on others and their reliance on us to provide goods and services can increase or decrease productivity