1. Explain the concept of economics and economic activities
ECONOMIC FOUNDATIONS
Explain the concept of economics and economic activities

2. Economics
The study of how to meet unlimited, competing wants with limited resources

3. Economic Activities
Consumption
Production
Exchange
Distribution

4. The process or activity of using goods and services
Consumption
The process or activity of using goods and services

5. Production The making of goods and services
Goods and services must be made in order for consumption to occur

6. Exchange Paying resource owners for use of their resources Wages
Salaries
Profits
Interest
Rent
Prices
The process of trading one good/service for another

7. Distribution
The process or activity by which income is divided among resource owners and producers

8. Wants
Desires
Needs
Something necessary; essential

9. Noneconomic wants
Desires for something that can be obtained without spending money
Economic wants
Desires for items that can only be obtained by spending money

10. Services: Intangible objects that can be sold
Goods: Tangible objects that can be manufactured or produced for resale
Services: Intangible objects that can be sold
Consumer
Industrial

11. Consumer goods: Products that are useful to consumers
Consumer services: Acts performed for the consumer for a fee

12. Industrial goods: Products that are used by industries in producing goods and services
Industrial services: Acts performed for business for a fee

13. Opportunity cost: The benefit that is lost when you decide to use scarce resources for one purpose rather than for another
Example: A consumer decides to rent an apartment, rather than to buy a house. The opportunity cost of this decision is the lost benefits of home ownership.

14. Trade-off: Giving up all or part of one thing in order to get something else
Example: Managers may be willing to accept the production of fewer quantities of a product in order to get workers to produce higher quality products.

15. Economy
The system by which a nation decides how to use its resources to produce and distribute goods and services.

16. (Factors of Production)
Economic Resources
(Factors of Production)
Land
Labor
Capital
Entrepreneurship

17. Land Natural resources
Everything contained in the earth or found in the sea

18. Labor Human Resources All people who work in the economy
Full- and part-time workers
Managers
Public employees
Professional people

19. Capital Money needed to start and operate a business
Goods used in the production of other goods

20. Entrepreneurship
Skills of people willing to take the risk of starting their own business

21. Scarcity
A condition that exists when there are not enough goods or services available to meet the wants and needs of consumers

22. Basic economic questions
What goods and services should be produced?
How should the goods and services be produced?
For whom should the goods and services be produced?