ECONOMICS
NAME_____________________________
ECONOMICS: The PRODUCTION, DISTRIBUTION, and CONSUMPTION of goods and services
1. PRODUCTION: The making of products
Example: factories
2. DISTRIBUTION: The movement of goods or products
Example: cargo ships and planes
3. CONSUMPTION: People who buy goods and services
Example: you and I buy products from stores
Make the Product
Move the Product
Buy the Product
FACTORS of PRODUCTION
How Products are MADE. “What does it take to make a product?”
1. LAND: The natural resources that Earth provides
Example: Water, Soil, Minerals, Crops
2. LABOR: Physical or Mental effort used to create goods and service
Example: Work! Digging a ditch, plowing a field, teaching a class
3. CAPITAL: Wealth in the form of money or property, used to create more wealth
Example: Things you can use to make money! Farmland, a Chicken, a boat for catching
fish
DISTRIBUTION
How Products are MOVED. “How do we get products to the people who want them?”
1. IMPORT: Products coming into your country from another country
Example: Products from China, India, or Mexico
2. EXPORT: Products that move out of your country to another
Example: Products we make in America and ship to other countries. Ford Trucks and
Computers
CONSUMPTION
People who buy products and services like you and me. “How and why do I buy goods?”
1. WANT: Something one desires but is not necessary to live.
Example: Xbox one, a new IPod, a fancy Sports car
2. NEED: Something that is necessary to live. A person will die without these.
Example: Food, Water, Shelter, Clothing
1. SHORTAGE: Not enough supply of a product or service for all the people that want it.
Example: Wal-Mart doesn’t have enough IPods for everyone who wants one
2. SURPLUS: When a production or supply is greater than the demand
Example: Wal-Mart has more IPods than it can sell
LET’S START A BUSINESS!
1. Congratulations! The moment you start a business you have become an ENTREPENEUR!
 ENTREPENEUR: A person who starts, runs and owns a business.
2. Starting a business isn’t free! I know that I will have many Expenses when I start my
business.
 EXPENSES: The cost required for something; the money spent on something
Examples: paying rent, buying materials for my products, paying my employees
3. How do I pay my employees?? We agree on how much money they make. Called…
 WAGES or SALARY: A fixed or regular payment made by an employer to an
employee.
4. Ok, now I have my business all set and ready to open. How do I get customers
interested in my products?? I need to give them an…
 INCENTIVE: A reason to do something; motivations
Examples: Buy one, get one free!!, 50% off!!
5. Hey! There are other businesses in Holmen that are selling the same product as me!
That’s ok, those guys are called….
 COMPETITION: Individuals or companies striving to sell more products or services
than the others
Examples: Microsoft vs. Apple, Coke vs. Pepsi
6. If my business is doing well and is making more money than its spending, I’m making a…
 PROFIT: Money gained in a business venture; making more money than spent.
7. Oh no! I can’t afford to keep my business going; I need to borrow money from the bank.
I owe them a…
 DEBT: Money or something of value owed to someone else
HOW DOES THE ECONOMY WORK?
1. There are TWO types of businesses in an economy:
 BASIC BUSINESSES: Businesses that are necessary for a nation to function. Think
NEEDS!
Examples: electricity, roads, running water
 NON BASIC BUSINESSES: Business that are nice… but not necessary for a nation
to function. Think WANTS!
Examples: Music, Sports and Designer Clothing
2. What are some things I see every day that are necessary for our country to function??
 INFRASTRUCTURE: The basic physical and organizational structures and facilities
needed for the operation of society.
Examples: Roads, Telephone wire and Power lines, Sewer systems
TYPES OF ECONOMIC SYSTEMS
There are many kinds of governments throughout the world and they all operate their
economies a little differently. Governments own certain businesses in an economy.
1. CAPITALISM or “Free Market Economy”
An economic system where both basic and non-basic businesses are privately owned
2. SOCIALISM or “Mixed Economy”
An economic system where government owns the basic businesses and the non-basic
businesses are privately owned
3. COMMUNISM or “Command Economy”
An economic system where both the basic and non-basic businesses are owned by the
government