Chapter 2 Flashcards
Consumption goods and services
are goods and services that individuals and governments buy and use in the current period (Ex: Food and drink; Electronics; Doctor visits; Police and fire services
Capital goods
are goods bought by businesses and governments to increase productive resources and to use over future periods to produce other goods and services (Ex: Machinery and equipment; Public schools; Interstate highways)
Factors of production
are the productive resources that are used to produce goods and services
Four categories of the factors of production
Land, labor, capital, entrepreneurship
Land
The natural resources that we use to produce goods or services
Labor
The work time and work effort that people devote to producing goods and services
Human Capital
The knowledge and skill that people obtain from education, on-the-job training, and work experience
Capital
Tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services
Entrepreneurship
The human resource that organizes labor, land, and capital to produce goods and services
People earn their incomes by
selling the services of the factors of productivity they own.
Rent
is paid for the use of land
Wages
are paid for the services of labor
Interest
is paid for the use of capital
Entrepreneurs receive
a profit or incur a loss
The world’s economies are broke up into what two broad groups
Advance economies; Emerging market and developing economies
Advance economies
are the wealthiest 29 countries that make up approximately 15% of the world population (1 billion people) and 50 percent of the global output.
Emerging market economies
are 28 countries generally located in Central and Eastern Europe, as well as Asia. Approximately 7.5 percent of the world population (500 million people) live in emerging market economies with the majority of the production coming from the BRICS economies (Brazil, Russia, India, China, and South Africa).
Developing economies
reflect the remaining 119 countries and almost 80 percent of the world population (5.5 billion people).
Households
are individuals or groups of people living together who own the factors of production.
Firms
are the institutions that organize the production of goods and services and choose the quantities of factors to employ and the quantities of goods and services to produce.
A market
is any arrangement that brings buyers and sellers together and enables them to get information and do business together.
Good Markets
are ones in which goods and services are bought and sold.
Factor Markets
are ones in which the services of factors of production are bought and sold.
