Introduction to Economics Unit 1

GDP =

market value of the output of final goods and services in the economy in a given period

GDP as informative

high GPD = high production, correlation with other measures of wellbeing

GDP as incomplete

inequality + natural resources + free time + household activities

Malthusian theory

low living standards → technology improves → avg. output per farmer improves → population rises → less land per farmer → avg. output per farmer falls → larger population but living standards come back to the original level

Malthus stance

improvements in technology will not raise living standards in long term

Economic system

way of organizing the production and distribution of goods and services in an entire economy

Capitalism

PRIVATE PROPERTY | MARKETS | FIRMS

Private property

you can… enjoy however you choose, exclude others, dispose by selling or gifting

Markets

way of connecting the people for exchanging/transferring of goods and services

Firms

way of organizing production one or more people owning a set of capital goods that are used in production. Firms pay wages, they sell their goods in an intention of making a profit

Capitalism accelerates technological progress

competition, adoption, development

Capitalism accelerates specialization

allows production on large scale, more productivity

Capitalism accelerates flexibility

firms can be born, expand, die

Capitalism & industrial revolution

Capitalism emerged at the same time, or just before the industrial revolution