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What is economics?
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Economics is not just about money. It is the study of how people, businesses and governments make choices about using limited resources.
Needs and wants
Needs are things we must have to survive: food, water, shelter, clothing.
Wants are things we would like but can live without: a games console, a holiday.
People's wants keep growing: once one is met, another appears.
Wants are things we would like but can live without: a games console, a holiday.
People's wants keep growing: once one is met, another appears.
Goods, services and resources
Goods are physical products, such as bread or cars. Services are things done for us, such as healthcare or haircuts.
To make them we need resources: land, workers, machinery and the people who organise production.
Resources are limited, so we cannot make everything everyone wants.
To make them we need resources: land, workers, machinery and the people who organise production.
Resources are limited, so we cannot make everything everyone wants.
Who makes economic decisions?
Economists study three main groups (economic agents):
Consumers decide what to buy.
Producers (firms) decide what to make and how.
Government decides what to spend, what to tax and what rules to set.
Microeconomics looks at individual consumers, firms and markets. Macroeconomics looks at the whole economy: growth, inflation, unemployment and trade.
Consumers decide what to buy.
Producers (firms) decide what to make and how.
Government decides what to spend, what to tax and what rules to set.
Microeconomics looks at individual consumers, firms and markets. Macroeconomics looks at the whole economy: growth, inflation, unemployment and trade.
Sort these into needs and wants: drinking water, a new phone, a winter coat, concert tickets.
- Needs are required to survive: water and a coat for warmth.
- Wants are nice to have: a new phone and concert tickets.
Answer: Needs: drinking water and a winter coat. Wants: a new phone and concert tickets.
Needs are essential; wants are desires that keep growing. Goods are physical, services are done for us. Resources are limited. Consumers, producers and government make economic choices. Micro studies individual markets; macro studies the whole economy.
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