Services on the other hand are intangible they are

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Unformatted text preview: ese cases, people are referring Chapter 1 What Is Economics? services land labor capital entrepreneurship to goods as tangible items only, not both tangible and intangible. They are talking about all the tangible products that have been produced and are available for you to buy in our economy. Toothpaste, alarm clocks, cereal, clothes—all of these items are goods. Services, on the other hand, are intangible. They are the tasks that you pay other people to perform for you. When people care for you at your doctor’s office, wait on you at a local restaurant, or cut your hair at the beauty shop or barbershop, these people are performing services. You will read more about how “goods and services” are produced and measured in several later chapters. Resources Goods and services cannot be produced without resources. Because the world has limited resources (scarcity), and because the central economic questions deal with the ways people use these limited resources to satisfy their unlimited wants, economists have spent much time studying and classifying resources. 01 (002-029) EMC Chap 01 5/8/06 4:48 PM Page 25 Both the oil refinery on the left and the newly planted forest on the right represent resources, or factors of production, as economists often call resources. Into which of the four major categories of resources would you place oil and wood ? In what way are these two resources different? In economics, a synonym for resources is factors of production. Resources, or factors of production, are what people use to produce goods and services. For example, corn, other natural substances, and many different machines are resources that were used to produce the cereal that you ate for breakfast this morning. Economists place resources in four broad categories: land, labor, capital, and entrepreneurship. Sometimes economists differentiate between renewable and nonrenewable resources. A renewable resource is a resource that can be drawn on indefinitely if it is replaced. For example, wood, or timber, is a renewable resource because once trees have been cut down, new trees can be planted. In other words, timber can be “renewed” to maintain a certain supply of it. A nonrenewable (or exhaustible) resource is obviously a resource that cannot be replenished. For example, oil and natural gas are nonrenewable resources. There is no way to “plant” more oil the way you can plant more trees. Using a certain quantity of oil means just that much less oil is left. Land When the word land is mentioned, you may picture an acre of woods or a plowed field in your mind’s eye. The resource land is more, however. It includes all the natural resources found in nature, such as water, minerals, animals, and forests. Labor Labor refers to the physical and mental talents that people contribute to the production of goods and services. For example, a person working in a factory is considered to be the resource labor. A TV weatherperson telling you what the weather will be like tomorrow is considered to be the resource labor. Your economics teacher is a resource —a labor resource. Capital In economics, capital refers to produced goods that can be used as resources for further production. Such things as machinery, tools, computers, trucks, buildings, and factories are all considered to be capital, or land All the natural resources found in nature. An acre of land, mineral deposits, and water in a stream are all considered land. labor The physical and mental talents that people contribute to the production of goods and services. capital Produced goods that can be used as resources for further production. Such things as factories, machines, and farm tractors are capital. Section 3 Basic Economic Language 25 01 (002-029) EMC Chap 01 11/17/05 4:04 PM Why Did British Troops Wear Bright Red Uniforms? ?????????????????? W hen George Washington and the colonists fought the British, the colonists were dressed in rags, while the British troops were clad in fine, bright red uniforms. Commenting on this difference, people often say, “The Page 26 British were foolish to have worn bright red uniforms. You could see them coming for miles.” Economists would not be so quick to label the British as foolish. Instead they would ask why the British troops wore bright red. For instance, David Friedman, an economist, thinks it is odd that the British, who at the time were the greatest fighting force in the world, would make such a seemingly obvious mistake. He has an alternative explanation, an economic explanation. Friedman reasons that the British generals did not want their men to break ranks and desert, because winning the war would be hard, if not impossible, if a lot of men deserted. Thus, the generals had to think up a way to make the opportunity cost of desertion high for their soldiers. The generals reasoned that the higher the cost of desertion, the fewer deserters there capital goods. Each capital good is used to produce some other good or...
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This document was uploaded on 01/16/2014.

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