Economics 100B Professor Steven Wood1/23/07 Lecture 3ASUC Lecture Notes Online (formerly Black Lightning) is the only authorized note-taking service at UC Berkeley. Please do not share, copy or illegally distribute these notes. Our non-profit, student-run program depends on your individual subscription for its continued existence.These notes are copyrighted by the University of California and are for your personal use only.Sharing or copying these notes is illegal and could end note taking for this course Lecture Economic Output Today we will be talking about economic output. It’s a major economic variable in the short and long run. Having a good understanding of this concept will be very important throughout the class. GDP We generally think of output as GDP – Gross Domestic Product – Official measure of a country’s economic output. This is the measure we use in all countries in order to make cross-country comparisons. GDP in a more formal sense is the market value of all final goods and services currently produced during a given time period in a country. Keep in mind that GDP is trying to get a measure of production. It is how much we are producing. Market Value The market value of the goods and services produced is essentially the selling price. The selling price is used to aggregate the various goods and services produced. The way we look at this is the same way a corporation would look at how much they sold. Every corporation does this and we can add them all up and come up with a measure for GDP. Goods and Services Good – physical component that can be stored. Service – Sometime that must be consumed immediately. It has no storable value. Once it is used up it is gone. Prices Prices serve as relative weights. More expensive products have a higher weighting in our GDP than less expensive goods. Remember, price has nothing to do with its inherent value or social value. It is simply a price of a good. Diamonds are highly weighted while water is not. This does not mean water is more important to living than diamonds! The Government The government is an exception to the rule of market value. The vast majority of what the government produces is not sold in the marketplace. We need a way to value these goods. For government items then, we will value them at cost.
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