Ecs 1501 Chapter 1 S2 2015

CHAPTER 1:

Economics: the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided to satisfy unlimited needs.

Wants: things that we do not necessarily need to survive, but would like to have

Needs: necessities; things that we need that are essential for survival

Demand: a demand for a product or service exists when people want to buy it and can afford it

Three main elements of the economic problem:

1. Wants

2. Means

3. Scarcity and choice

Opportunity cost: the cost of something you have to give up to get something else; the value of alternative opportunities that have been given up

Consumer goods: goods that are used by consumers such as individuals or households to satisfy their wants

Capital goods: things we use to produce other things, such as machinery and tools

Categories of consumer goods:

1. Non-durable goods: goods that are used once only

2. Semi-durable goods: can be used more than once and usually lasts for a limited period

3. Durable goods: normally lasts a number of years

Final goods: goods that are used by households, firms and individuals as a final product – they are not used to produce anything else

Intermediate goods: goods that are purchased to be used in the production of other goods and services

Private goods: goods that are consumed by individuals and households, and that must be paid for

Public goods: goods that are consumed by the community or society; no one can be excluded from using them (ex. public roads)

Economic goods: products that have utility (usefulness) for which consumers have to pay. These products are manufactured within the economic system. The supply of economic products is limited relative to the demand for these products. Economic products have exchange value and can be used to measure the wealth of a community.

Free goods: products that have utility but for which we do not have to pay because they are not scarce...