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C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 2.1 WHAT GOODS ARE PRODUCED? What We Consume People buy millions of different goods and services. We can describe what people buy and consume only if we classify goods and services in large groups. Let’s look at the items that people spend most on. 2.1 WHAT GOODS ARE PRODUCED? Figure 2.1(a) shows what we consume. 2.1 WHAT GOODS ARE PRODUCED? Figure 2.1(b) shows that Americans spend: 2.1 WHAT GOODS ARE PRODUCED? What We Produce Businesses located in the United States produce most of the goods and services that people in the United States buy. Businesses in the rest of the world produce goods and services that the United States imports. The largest part of what we produce today is services, not goods. 2.1 WHAT GOODS ARE PRODUCED? Figure 2.2 shows the largest five items of services produced. 2.1 WHAT GOODS ARE PRODUCED? What We Buy from the Rest of the World 2.2 HOW ARE GOODS PRODUCED? Factors of production The productive resources used to produce goods and services. Factors of production are grouped into four categories: Land Labor Capital Entrepreneurship 2.2 HOW ARE GOODS PRODUCED? Land The “gifts of nature” that we use to produce goods and services. All the things we call natural resources. Labor Work time and work effort that people devote to producing goods and services 2.2 HOW ARE GOODS PRODUCED? Capital Tools, instruments, machines, buildings, and other constructions that have been produced in the past and that businesses now use to produce goods and services. Entrepreneurship The human resource that organizes labor, land, and capital--entrepreneurs come up with ideas about what and how to produce, make business decisions, and bear the risks that arise from these decisions. 2.2 HOW ARE GOODS PRODUCED? Land 2.2 HOW ARE GOODS PRODUCED? Figure 2.4(b) shows the urban distribution. 2.2 HOW ARE GOODS PRODUCED? Figure 2.5 shows how long the known
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