GDP Notes

Chapter 1:
Section 1
What is Economics?
Scarcity and the Science of
– study of how people try to satisfy
unlimited & competing needs and wants.
Scarcity – basic economic problem that arises
because people have unlimited wants with
limited resources causing them to make various
economic decisions on how to allocate resources
Our Needs and Wants
Needs – basic requirements for survival
> food, clothing, shelter
Wants – something we would like to have
> car, watch, cell phone
Divided into two groups – goods and services depending on
Goods – useful, tangible items (book, car)
Services – work performed for someone (computer
Types of Goods
 Durable
goods – last 3 yrs or more (cars, refrigerators)
 Nondurable goods – last fewer than 3 yrs (food, clothes,
 Consumer
goods – intended for final use by individuals
(shoes, clothes, cars)
 Capital
goods – tools or goods used by business to produce
other products (machinery, equipment)
Paradox of Value
Why some essentials such as water are
cheaper than nonessentials, such diamonds.
Goods and services must be scarce & have
usefulness. Diamonds are scarce & useful. Water
on the other hand has usefulness, but not
accumulation of products that are
tangible, scarce, have utility and are
Nations – natural resources, factories, stores,
highways, money, etc.
Individuals – cars, houses, money, etc.
Questions all Nations Face
WHAT to Produce
 HOW to Produce
 FOR WHOM to Produce
Questions all Nations Face
WHAT to Produce
 HOW to Produce
 FOR WHOM to Produce
does this matter?
Gross Domestic Product
The monetary value of all final
goods, services, and structures
within a country’s borders in a 12month period. GDP is the most
comprehensive measure of a
nation’s total output and a key
measure of its economic wealth.