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Unformatted text preview: 1. Concerns of Economics Income: primary resources available for current consumption * Consumer goods and services are consumed in the current period Wealth: capital goods used for future consumption or production * Capital goods are not consumed in the current period and include: * Consumer durable goods such as houses and automobiles * Producer durable goods such as plant and equipment * Intangible capital such intellectual property rights * Human capital such as knowledge, skills, and health of the labor force * Natural resources such as land, oil and coal deposits Growth: increase in income and wealth * Growth is measured in terms of per capita income or wealth Equity: distribution of income and wealth * A more equitable distribution income and wealth is considered preferable. * However, redistributive policies which undermine the incentives to create income or wealth raise difficult issues. 2. Driving Forces of Economics Production: creation of goods and services * Capital and labor combine to create consumer and producer goods Trade: exchange of goods and services * Buy and sell goods * Transfer goods from lower value users to higher value users Investment: capital for future production * Producer durable goods such as plant and equipment * Research and development expenditures on new products and technologies * Education for the workforce to acquire human capital Government Infrastructure * Legal System for private property, contracts, and corporations * Physical infrastructure of roads and sanitation * National defense and police protection 3. Capitalism Capitalism = Market Economy with Private Property What is Private Property? * Ownership of capital by individuals and businesses, not government * Land, buildings, durable goods * Derived from English Property Law (1160 – 1660) * Indefinite exclusive possession with right to devise and alienate * Devise means to will the property to others (e.g. family) at death * Alienate means to sell or rent the property to someone else What is a Market Economy? * Individuals decide when to work, consume, and save * Businesses decide when to invest, produce, and sell * Government does NOT make these decisions * Consequences of poor decisions born by individuals and businesses 4. Som Government ownership of important property and resources Government ownership of the major businesses * Managers are hired to make decisions on investment, production, and sales * Individuals decide on work, consumption, and saving Markets are employed to allocate labor, goods, and services * Government regulation of these markets...
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- Spring '04