Factors of Production

Factors of Production - Factors of Production 1. Land...

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Factors of Production 1. Land (natural resources) 2. Labor (workers) 3. Capital (machines, tools, buildings…) 4. Entrepreneurship 5. Knowledge/information economic system- How a society allocates its resources to provide goods and services Ownership and control of resources Adam Smith 1723-1790 “invisible Hand” Scottish Political Economist and Moral Philosopher “The Wealth of Nations”, 1776 Father of Free Trade and Capitalism Free Market Capitalism: Self-interested Behavior Regulated by Competition Justice – do no harm “Atomistic Markets”: Infinite Buyers and Sellers All economic actors operate with “self Interest” No Outside Influence – Laissez Faire Result: All resources allocated to their most efficient use Competitiveness of Markets Atomistic or “Perfect” Competition Unlimited buyers and sellers Monopolistic Competition
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Starbursts, Skittles, Generic Fruit Chewies Oligopoly Autos, Airlines, Steel, Cable Monopoly Electricity, Gas, Water Elastic Demand Lots of alternatives, varying prices Clothing, furniture Inelastic Demand Few if any alternatives, pay any price Gasoline, drinking water Indicate the health and trend of an economy P roductivity U nemployment Rate G ross Domestic Product (GDP) I nflation Rate --------------------------------------------------------------------------------------------------------------------- -------------------Types of unemployment Frictional - when people are moving on from one job to a new and better one (More productive individually/society) Cyclical- Seasonal (Natural Business Cycle)- Lifeguard, Vail, DQ, Golf Course OR when ppl out of work because of downturn in business ( Now= Mortgage Brokers) Structural- People lack skills/training to work where jobs ARE available Measures the percentage of the population 16 and over that is actively looking for work but cannot find employment -------------------------------------------------------------------------------------------- Widespread increase in prices Measured by the Consumer Price Index (CPI) ‘Basket’ of goods/services
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Fed works to control inflation by manipulating the supply of money (monetary policy)- Deflation B. The Role of the Government 1. Channeling Markets Along Competitive Lines 2. Equality versus Efficiency 3. Market Failures: Externalities and Public Goods
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Factors of Production - Factors of Production 1. Land...

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