Basic economic principles

Economic Principles

Economics looks at decisions people make to meet needs and wants.

Needs are things that you must have to live or stay healthy and safe. Wants are things that you would only like to have.

Natural Resources

Natural resources are useful things that come directly from nature. They are not made by people.

Goods and Services

Everything you can buy is either a good or a service.

A good is something you can touch or hold in your hands. For example, a hammer is a good.

A service is a job you pay someone else to do. For example, cooking food in a restaurant is a service.

Producers and Consumers

A producer is someone who makes a good or provides a service. A consumer is someone who buys a good or service.

Producers and consumers depend on each other. Producers need consumers to buy their products. Consumers need producers to make and sell their products.

Cost and Benefits

Before you decide to do something, it is often helpful to list costs and benefits.

Costs

Costs are what you give up or spend when you decide to do something. Costs involve giving up things that you want or need.

Benefits

Benefits are what you gain or save when you decide to do something. Benefits involve gaining something that you want or need.

People use money or resources to get or make things. Because money and resources are scarce,or limited, people must choose between things they want.

You can choose to use your money or resources to get something. But then you give up the chance to get some amount of something else.