Human Capital and Capital Goods

Describe factors that influence economic growth and examine their

presence or absence in Europe

What is Human Capital?• Training and education by taking classes

and/or job experience that increases a persons value in the work place.

• Intelligence or physical skill• Training increases productivity• People with more education earn more $$• What are some examples of investing in

Human Capital?• Teachers invest in human capital

Who would make more money each year: a doctor or a data entry worker?

• What would explain this?• Amount of education or investment in human

capital• The doctor is required 8+ years of education

after high school and earns $200,000 (average)• With data entry, only a high school degree is

required. The average salary being $26,000.

Capital Goods• Capital goods are tools used in the production of

other goods.• Some examples are factories, machinery, tools,

equipment• Capital goods are also any raw materials used to

manufacture goods and services.• Money is NOT a resource – Money is a means

or medium of exchange– Money is not worth anything by itself, its value is what

we can exchange the money for.

Factors of Production1. Natural Resources –or land that has all the gifts of nature including:

– mineral deposits, water, arable land, vegetation, natural forests, marine resources, other animal life, the atmosphere and the sun. Minerals are a limited, non-renewable resource

2. Labor - (Human capital)– Quality

(knowledge) is better than quantity

3. Capital goods- items used to create goods & services

4. Entrepreneurship – innovators (creating new products)– The entrepreneur is the driving force behind production.– Entrepreneurs introduce new products and new techniques – Risk takers- the people who take chances. They do this

because they anticipate that they will make profits. But they may also suffer losses and perhaps bankruptcy.

Natural Resources

Labor

Entrepreneurship

Guess who this is.

Gross Domestic Product or GDP

• Gross Domestic Product (GDP) is the value, expressed in dollars, of all final goods and services produced in a year. – Goods are things that we use, touch and see – Services are activities people do for us.– The production of these goods and services

provides jobs for people in the economy. – The income people earn is then used to

consume goods and services.