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ECONOMIC FOUNDATIONS Explain the concept of economics and economic activities

ECONOMIC FOUNDATIONS Explain the concept of economics and economic activities. Economics. The study of how to meet unlimited, competing wants with limited resources. Economic Activities. Consumption Production Exchange Distribution. Consumption.

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ECONOMIC FOUNDATIONS Explain the concept of economics and economic activities

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  1. 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. 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. Paying resource owners for use of their resources Exchange • 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. 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. 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?

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