Question

Which of the following are economic goods? Explain why cach is or is not an cconomic good. a. steaks b. houses c. cars d. garbage c. T-shirts

Short answer

a. Steaks b. Houses c. Cars d. Garbage e. T-shirts Answer: a. Steaks, b. Houses, c. Cars, and e. T-shirts are examples of economic goods because they have value, can be sold, and have a limited supply. They satisfy human wants and needs, such as food, shelter, transportation, and clothing. Garbage, on the other hand, is not considered an economic good because it does not hold value or can be sold, and it does not directly satisfy human wants and needs.

Step-by-step solution

Define Economic Good

An economic good is a product or service that has value, can be exchanged for other goods or services, and is subject to limited supply. It satisfies human wants and needs, which are the basis of all economic activity.

Analyze Each Option

a. Steaks: Steaks are an example of an economic good because they have value, can be sold, and have a limited supply. People are willing to pay for steaks to consume, which satisfies their wants and needs. b. Houses: Houses are also economic goods because they have value, can be sold, and have a limited supply. People need shelter, and are willing to pay for houses to provide them this service, therefore satisfying their wants and needs. c. Cars: Cars fall under the category of economic goods as well. They have value, can be sold, and face a limited supply. People require transportation, and cars are one way of satisfying this need. Thus, cars are an economic good. d. Garbage: Garbage is not considered an economic good. Although it is subject to limited supply, it does not hold value or can be sold. Additionally, garbage does not satisfy human wants and needs; rather, it is the byproduct of consuming other economic goods. e. T-shirts: T-shirts also are economic goods, as they have value, can be sold, and have limited supply. People need clothing, and T-shirts are an example of a product that fulfills that want or need.

Explain Why Cash is or is not an Economic Good

Cash is not considered an economic good, but rather a medium of exchange. It is used to facilitate transactions and trade of economic goods and services, but does not hold intrinsic value on its own. In other words, cash is valuable because it can be exchanged for economic goods and services, not because it satisfies a human want or need directly.

Key concepts

Value

Value refers to the worth that people place on a good or service. It's not just about how much something costs. Rather, it's about the perceived benefit or satisfaction it provides to an individual. For example, houses have high value because they provide shelter, which is a basic human need.
In the case of steaks or cars, value can be associated with the enjoyment or utility they offer, like the pleasure of consuming a delicious meal or the convenience of traveling swiftly.

• Value is subjective, meaning it can change depending on a person's preferences or circumstances.
• Economic goods must possess value to be desirable in the market.
• The value of a good often determines how much someone is willing to pay for it.

Understanding value is crucial because it directs economic activity and decision-making.

Limited Supply

Limited supply means that there is not an endless amount of a particular good or resource available. This scarcity forces choices and prioritization in how resources are allocated. For instance, both steaks and cars have a limited availability due to factors like production costs and natural resource constraints.
The limitation in supply is a key aspect that makes a good economic. Without limited supply, goods would not hold the same importance or value.

• Scarcity leads to competition among buyers, which affects market prices.
• Limited resources force producers to decide how best to use them efficiently.
• It creates opportunities for trade, as people seek to acquire what they cannot produce themselves.

Recognizing limited supply helps us understand market dynamics and the importance of resource management.

Human Wants and Needs

Human wants and needs describe the various desires and necessities that drive economic activity. Needs are essential for survival, like food and shelter, whereas wants are additional desires that enhance quality of life, such as entertainment and luxury items.
Economic goods must satisfy these wants or needs to be considered valuable. For example, T-shirts fulfill the need for clothing, and houses provide essential shelter.

• Understanding human wants and needs helps us comprehend consumer behavior.
• Producers aim to provide goods that meet these demands to achieve success in the market.
• Meeting these needs is fundamental to improving societal welfare.

Human motivation through wants and needs shapes the demand for goods and influences economic systems.

Medium of Exchange

A medium of exchange is anything that is widely accepted as a tool for trade in the market. It simplifies transactions by eliminating the complications of barter systems, where direct exchange of goods was necessary. For example, cash is a common medium of exchange, used to purchase economic goods instead of trading them directly.

• A medium of exchange must be universally accepted, portable, and durable.
• It does not need to have intrinsic value, as long as it can be exchanged for something valuable.
• Cash simplifies trade by serving as a convenient and efficient transaction tool.

Understanding the role of a medium of exchange underscores the functioning of modern economies and the facilitation of trade.