Gross Domestic Product (GDP) is the sum of income coming into a country during the economic period in which it is measured.  GDP can me measured by a country’s income (also called gross domestic income (GDI), or by the total cost of all finished goods and services produced within the country.  It is called “gross” domestic product as the “gross” means that depreciation is not taken into account for investment.  If depreciation were taken into account and net investment was calculated then it would be net domestic product.

GDP can be calculated from the follow equation:

GDP = CONSUMPTION + GROSS INVESTMENT + GOVERNMENT SPENDING + (EXPORTS - IMPORTS)

The labor force is the number of people in a population who are of working age and are willing or wanting to work.  Working age is usually above sixteen years old and below sixty-five.  If someone is not looking for work, such as a homeless peddler on the street or a full time student, then they are not considered unemployed because they are not willing or wanting to look for employment.  Also if someone has not been able to find a job and gives up looking then they are considered a discourage worker, but they no longer count as part of the labor force or the unemployed becuase they are no longer seeking employment.

The following equation calculates the labor force:

Labor Force = Employed + Unemployed

Opportunity cost is the cost of doing one thing as opposed to another, or buying one thing as opposed to another.

For example, if you decide to skip work for a day so that you can go to the beach, the opportunity cost of going to the beach would be the pay that would have to give up by not working for that day. To get a true gauge of the cost of an activity the opportunity cost should be added to the actual cost of the activity. For the beach example that actual cost could be the gasoline it takes to drive to the beach.

Opportunity cost does not have to be simply monetary. An opportunity cost can also be measured in pleasure or other benefits. An example can be if you choose to go to the beach instead of to the park, the opportunity cost of going to the beach is giving up the possible enjoyment that you may have had at the park.

Thinking with opportunity cost in mind allows for greater decision making in all aspects of life as then only the truly profitable aspects of life for you are taken into account.