Starter

• Write the answer these questions.1.Who fought in the American Revolution?2.What did Thomas Paine write?3.Why did Anti-Federalists fear a strong central

government?4.Why were the colonists mad at Parliament?5.What condition exists with no government?

7.05 Explain the impact of investment on human, capital,

productive, and natural resources.

Investment

• A firm or worker can increase productivity through investment

• Investment- using resources that could bring immediate benefits for the purpose of gaining at a later time

• Example- saving money in an interest bearing account

• Productivity growth comes from capital investment- investment in capital goods and human capital

• Capital goods- goods used to make other goods- bolts or screws

• Consumer goods- goods purchased for use by individuals.

• Recycling• Education and training

Consumer Goods vs.Capital Goods

• Create two lists. Place the following products in the correct list for which they which most likely be.

• Forklift, hamburger, candy bar, television, pencil, dump truck, car, tennis ball, gun, lumber, gold, gasoline, airplane, birthday cake, jack hammer, sheetrock, Christmas tree, mattress, helicopter, rake, Bible, bleachers.

How much to invest?

• Companies need to decide how much money they plan to invest and how much they will spend in their business.

• They can take into account– Producer Price Index (PPI)– Output vs input– Law of diminishing returns

Cost of Investment vs. Estimated Future Benefits

• Producer Price Index (PPI)- measures the average changes in prices for different goods.

• Input versus output• Law of Diminishing Returns– Investing too much can hurt a business– If a restaurant adds one chef, it make cook more

food. If it adds ten chefs, less will get done because of a lack of space, arguing, etc.

Today’s Assignment

1. What is the difference between a capital good and a consumer good?

2. As the owner of a McDonalds restaurant, what would be your area of capital investment?

3. What would be the trade-off for a company installing new equipment in their buildings?

4. Explain law of diminishing return in your own words. Do not use mine.