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Econ 1 Notes - Economics 1 Notes Single proprietorship run...

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Economics 1 Notes 01/06/09 Single proprietorship: run by an individual unlike a partnership or corporation 23 million single proprietorships 3 million partnerships 4 million corporations = 30 million firms $14 trillion worth of goods and services from product market in 2008 o Firms product market (supply) o Product market housing (demand) o Housing factors of production (supply) o Factors of production firms (demand) Firms supply products Factors of Production (inputs) 1. Labor force (153 million) – ½ population (303 million) 2. Capital a. Machines b. Structures (factories, offices, warehouses) c. Vehicles 3. Natural resources (raw materials) a. Oil, coal, iron, steel 4. Entrepreneurship 5. Technical knowledge and progress Economic good (physical and tangible existence) o Contains an economic price Economic service: actual economic service GDP: all goods and services produced in America Gross National Product: all goods and services GDP per capita = $45,000 Ends > means Scarcity of resources forces us to make choices among the ends Frank Knight o What goods and services are we going to produce? o How are we going to produce those goods and services? o Who gets what we do produce? Level of income determines this Command economy: do not have markets
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01/08/09 Double coincidence of wants o Find someone who wants what I want Do not specialize in production, diversify In a specialized economy: o People become very good at things o Adam Smith 1776, “Wealth of Nations” Increasing productivity o When productivity goes up, salary goes up Principle that governs the assignment of task: Comparative (of relative) Advantage o David Ricardo
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