Economic Resources

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Chapter 19.1

• Economic Resources

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Producing Goods and Services

• Economic output includes goods or tangible
  products and services work performed for
  someone else.
• Four factors of production are needed to produce
  goods and services natural resources, labor,
  forests and minerals.

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• Natural resources are all the gifts of nature
  that make production possible, such as land,
  rain, forests and minerals.
• Labor is the nations workforce or human
  resources. It includes the physical and mental
  talents of the people who help produce goods and
  services. Factors such as population growth,
  education and war affect the quantity and quality
  of labor.

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• Capital or capital goods, includes the tools,
  machinery and buildings used to make other
  products. Consumer goods satisfy wants directly
  capital goods do so indirectly by aiding
  production of consumer goods.

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• Entrepreneurs are individuals who start new
  businesses, introduce new products and improve
  management techniques. They are innovative and
  willing to take risks. They drive the economy
  because they use factors of production to produce
  new products.

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Gross Domestic Product

• Gross Domestic Product (GDP) is a measure of the
  size of the economy. It is the total value, in
  dollars, of all final goods and services produced
  in the country during a single year. Final goods
  are goods sold to their users.
• GDP does not count intermediate goods, which are
  components of final goods. It also does not
  count the sale of used goods, which do not
  represent new production.

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• GDP is expressed in terms of money. This enables
  us to compare the relative worth of goods and
  services, which is more meaningful than simply
  numbers of products.
• To compute GDP, identify all goods and services
  produced and their average prices. Multiply the
  number produced of each item by its average
  price. Then add up everything.

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• If the new GDP is higher than the previous one,
  then the economy is expanding. If it is lower,
  the economy is declining. Economists study GDP
  figures regularly to analyze business cycle
  patterns.
• Standard of living is the quality of life based
  on the possession of necessities and luxuries
  that make life easier. When GDP grows faster
  than the population, there are more goods and
  services for us.

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• GDP does not measure societys overall
  well-being. Other things such as a reduction
  in crime, drug abuse and greater equality of
  opportunity can make a country better off
  without raising GDP.
• Failure to account for improvements in product
  quality is a shortcoming of GDP. Greater
  production of goods and services is only one of
  many factors that raise the standard of living.