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  1. Economic environment. Economic goods and services.

Economics examines the production and distribution of goods and services. Economics is now important to everyone. Your personal understanding of economics will influence how you earn your living and help you make better economic decisions.

Even before people start school, they make two very important economic discoveries. They find that there are lots of things in the world they want. They also find that they cannot have them all. There is a big gap between what they want and what they can have. Later, young people learn another lesson. When they watch television commercials, they discover that there are thousands of things they or their parents could buy. Scarcity forces people to make choices about how they value certain goods and services.

Goods and services represent an important term in basic economics. Goods are tangible things that can be consumed. There are a lot of types of goods. Consumer goods are items people purchase to satisfy their needs and wants, such as food, shelter, and clothing. Some consumer goods, such as food, do not last a long time. Other goods, such as furniture, cars or computers, last longer. Sooner or later, though, consumer goods are used up. Bananas are a typical example of perishable goods, by “perishable” we mean goods which cannot be stored for any length of time without going bad. Producer goods refer to resources producers need to create goods, like cotton and steel.

Services are actions people perform, such as educational services, haircutting, transportation, health services and so on.

A producer is someone who makes or grow goods, or offers services. A person who makes lemonade and then sells it is producing goods. A person who shovels snow during the winter or clerks in a store is providing a service. A consumer is someone who buys goods or services.

Since goods and services are scarce, their price is determined by supply and demand. Supply refers to the total amount of goods or services that are produced, and demand refers to the total amount that consumers wish to consume.

Economics examines how people use their scarce resources in an attempt to satisfy their unlimited wants. The problem is simply that the resources available to satisfy these wants and desires are limited. Scarcity is a fundamental concept of economics. According to the principle of scarcity, time, people, natural resources and money always are limited, in contrast to our unlimited desires. Economic choices arise from scarcity. We are giving up one thing upon choosing another.

Resources are the inputs, or factors of production, used to produce goods and services. Generally, we put resources into 3 categories: labour (people), capital, and land. Land refers not only to land in the conventional sense of tracts of ground, but all other natural resources, that is, gifts of nature, including bodies of water, oil reserves, minerals and even animals. Labour is the broad category of human effort, both physical and mental included. Capital ranges from factories, machines, and so on to human knowledge and skills that are used to.

Due to scarcity, every group of people, individuals and nations must answer three basic economic questions: 1. What will be produced? 2. How will it be produced? 3. Who will get what is produced? Every society must decide how to use these inputs to satisfy human wants. The answers to the questions depend on a country’s human, natural and capital resources, and also on its customs and values. Each country will answer these questions in a different way. Until now, all economists are working for these questions trying to give the answers.

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