Economics is the study of how to meet unlimited wants with limited resources. It involves the economic activities of consumption, production, exchange, and distribution. Consumption is using goods and services, while production is making goods and services. Exchange involves trading resources for goods through prices, wages, rents, etc. Distribution divides income among resource owners. Goods are tangible objects while services are intangible acts. Economic resources include land, labor, capital, and entrepreneurship which are used to produce and distribute goods in an economy. Scarcity means not enough resources to meet all wants. Basic economic questions address what and how to produce goods, and who they are produced for.

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. 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. 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?