ECONOMICS
CHAPTER 1 SECTION 3
NEEDS AND WANTS

NEEDS: a basic requirement for
survival


Ex. Food, shelter, and clothing
WANTS: is a means of expressing a
need

Ex. Pizza, hamburger, or taco
GOODS, SERVICES, AND
CONSUMERS



GOODS: is a tangible commodity
 Ex. book, car, or cell phone
SERVICES: work that is performed by
someone
 Ex. haircuts, home repairs & the work that
teachers and doctors perform
CONSUMERS: people who use goods and
services to satisfy wants and needs
PRODUCTS

Free Products: Products that are so
plentiful, no one can own them.


Examples: sunshine, air
Economic Products: Goods and
services that are useful, relatively
scarce and transferable to others. A
price can be placed on these things.

Examples: computers, football players,
volleyball nets
TYPES OF GOODS




Consumer Good: Intended for final use by
individuals (chairs, clothes, cars)
Capital Good: A manufactured good used to
produce other goods and services (oven in a
bakery, x-ray machine in doctor’s office)
Durable Good: Any good that lasts 3 or more
years when used on a regular basis. Can be both
consumer goods and capital goods (chairs, ovens)
Nondurable Good: An item that lasts for less than
3 years when used regularly (food, clothing,
toothbrushes)
CONSUMPTION


Consumption: the process of using up goods and
services in order to satisfy wants and needs
(practiced by consumers)
Conspicuous consumption: the use of a good or
service to impress others (buying flashy cars,
designer clothes, excessive jewelry)
Think – Pair - Share


What are some expensive goods or
services you want to consume? What
are the brands that make an impression
on your peers?
What is the biggest example of
conspicuous consumption you have
seen?
PARADOX OF VALUE

PARADOX OF VALUE: Water is essential for
survival, but almost free. Diamonds are not
essential, but cost a lot of $$$. Why?

UTILITY: the capacity to be useful to
someone
Scarcity + Utility = VALUE
THINK-PAIR-SHARE

What are some other nonessential
goods that have a lot of value?
Adam Smith – The Wealth of
Nations





Productivity: more highly skilled workers, new
technology, and specialization led to greater technology
Wealth: sum of all the nation’s goods produced by labor,
regardless of who owns those goods
The Invisible Hand: competition and the market system
working together guiding resources to their most
productive use
The Role of Government: government intervention in the
economy should be kept to a minimum
Laissez-Faire: French for “let do,” “let it be” or “leave it
alone,” applied to economics to mean no government
intervention in economic affairs
WEALTH


the sum of those economic products that are
tangible, scarce, useful, and transferable from
one person to another
goods are counted as part of a nation’s
wealth, but services are not
PRODUCTIVITY



Productivity: the efficient use of productive
resources. Increases when more output can
be produced with the same amount of inputs.
Also goes up if the same output can be
produced with fewer inputs.
Specialization of labor: workers perform the
task they can do the best.
Human capital: the sum of skills, abilities,
health, and motivation of people.
ECONOMIC
INTERDEPENDENCE

MARKET: a location or other
mechanism that allows
buyers and sellers to deal
readily in an economic
product

FREE ENTERPRISE
ECONOMY: one in which
consumers and privately
owned businesses, rather
than the government, jointly
make the decisions

FACTOR MARKET: a
market where productive
resources are bought and
sold (companies hiring
workers, banks loaning
entrepreneurs startup
money)

PRODUCT MARKET: a
market where producers
offer goods and services for
sale (CD store, Hallmark,
Wal-Mart)