All of the resources, material goods, and skills of a country’s people determine its wealth. A nation’s wealth is comprised of everything the nation has within its borders. Wealth is the accumulation of all those products that are scarce, tangible and transferable from one person to another. On the other hand, diamonds have a high monetary value but have little use and are not essential for survival. The “paradox of value” is a situation where something should have value because it is useful, such as water, but it, in fact, has little monetary value. One contradiction in economics is “the paradox of value”. One person may enjoy collecting DVDs of movies or attending concerts, while another person may not find those items as useful. Some people may find an item more useful than another. A product’s utility is determined by the consumer. Utility is the usefulness of an item and must provide the purchaser with some satisfaction otherwise, the purchase would not take place. This type of economic decision also takes into account the concept of utility. If the item is worth more to the consumer than the value it is listed at then we may decide to purchase the product and trade money for the good or service. Individuals, businesses, and governments determine if a product or service is worth the “value” that is placed on it. Value is defined as an item that has a worth that can be expressed in dollars and cents. While a service is something we pay for but it is not tangible.Īccording to economists, for something to have value, it must be scarce and have utility. The difference between a good and a service is that a good is tangible, it is something that we receive. Haircuts, insurance, a visit to the dentist, or banking are all services. Televisions, refrigerators, or tables are durable goods because they will last three or more years when used on a regular basis.Ī service is also considered an economic product because people will pay to have a service performed by someone else. Writing paper, food products, and gasoline are considered non-durable goods since they do not last for longer than six months when used regularly. While capital goods are items that are manufactured to produce other goods and services, such as a bulldozer used to clear land for homes, school computers for students, or a cash register at a grocery store. Consumer goods are products that are intended for use by individuals, such as shoes, backpacks, cars, or computer. Because goods and services may be scarce, they will command a price. We acquire things or services to satisfy our wants and needs. When we purchase goods and services, we are consumers. The most well-known theories are probably those of supply and demand, but you will learn many others.Įconomic products are goods and services that are considered transferable, scarce and useful to individuals, businesses, or governments. Both micro and macroeconomics are explained with theories and models. Instead, they use the graph of the theory to help them figure out the solution.Īlthough at the basic level, you can sometimes figure out the right answer without applying a model, if you keep studying economics before too long you will run into issues and problems that you will need to graph to solve. In this course, we will mostly use graphs.) Economists do not figure out the answer to the problem first and then draw the graph to illustrate. In economics, theories are expressed as diagrams, graphs, or even as mathematical equations. Then they use the theory to derive insights about the issue or problem. When they see an economic issue or problem, they go through the theories they know to see if they can find one that fits. \)Įconomists carry a set of theories in their heads like a carpenter carries around a toolkit.
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