Chapter 3 Flashcards
what did Adam Smith say about the wealth of a country?
the wealth of a country consists not in its gold and silver only but in its lands, houses, and consumable goods of all different kinds
value is created through
production and trade
the production process:
turns inputs into consumable outputs
resources/inputs are:
natural resources/ land: tangible but not produced
labor: physical and mental talents, applied to production
capital: produced means of production
entrepreneurship: risk taking/ risk bearing and innovation
what are the costs of resources/inputs?
rent, wage, interest, and profit
technology
the way that inputs are combined to produce outputs
what did Karl Marx say about technology?
he thought that technology caused unemployment.
make work fallacy
the idea that jobs are valuable whether of not the labor’s production adds value
digging ditches with spoons example
production possibilities frontier assumes
only 2 goods are produced over same period of time
some fixed amount of resources is used
a given technology is used
what did Adam Smith say about wealth?
wealth is not really having money. wealth is having valuable stuff
economic growth
an expansion of an economy’s productive capabilities
for individual and entire economies, income and wealth depend on 3 things
quantity of resources
quality of resources
freedom to use those resources
human capital
individuals upgrade their labor by education and training
invisible hand
we are lead to serve the public by doing the best possible and also doing the best for ourselves
