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Basic economic [email protected]
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Topics Basic economic functions of a human society Production and consumption; their inputs
and outputs Goods (bads), products, wealth, and welfare Ideal content (technology) and physical form
of all products The natural environment (natural resources)
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A human society
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Definitions Production: making of goods Consumption: use of goods Goods: Whatever humans regard as good,
whatever enhances welfare Products: The outputs of production (good or
bad) Bads: Negative goods Wealth: stock of goods at a point in time Output: flow of products over a period of time Welfare: human wellbeing
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Definitions Inputs of production:
Natural resources (T) Produced means of production (K)
Capital goods Intermediate goods
Labor power (L) Waste
Outputs of production: Consumption goods (CG) Produced means of production (K) Waste
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Definitions Inputs of consumption:
Consumption goods Waste
Outputs of consumption: Individual human beings
Labor power (L) Welfare
Waste
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Notes Not all goods are products (e.g. natural resources are
goods, but not products) Not all products are goods (e.g. waste is a product and bad) In some cases, production and consumption coincide in
time (e.g. transportation, haircuts, etc.) T is an input of consumption as well All products are ideal in content and material (or physical)
in form The ideal content of goods is called technology Technology is like a cooking recipe: lists of ingredients (i.e.
inputs: T, K, L) and describes how to mix them up to produce a given product
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Notes Welfare and labor power results from
consumption – but also from production (or, if you prefer, only from consumption, but including the consumption that coincides in time with production)
A sustainable interaction with the rest of nature is increasingly a necessary product we need to produce
“Scarcity” (of goods, resources, etc.) means simply that our productive power is finite
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Productivity and cost Productivity = output/input Cost = input/output
Example: 2 workers x 2 hours of labor to produce 1 clean kitchen
Productivity = ¼ kitchen/hour of labor Cost = 4 hours of labor/kitchen