Nature & Purpose of Economic Activity

The central purpose of economic activity is the production of goods and services to satisfy needs and wants

Goods are tangible products e.g. a car, a loaf of bread

Services are intangible e.g. a haircut, an aeroplane flight

Needs are basic requirements people need to survive e.g. food, shelter Wants are things that people desire e.g. a sports car

The main purpose of economic activity is to provide goods and services to meet needs and wants

The four key economic resources are land, labour, capital and enterprise

• Land refers to all naturally occurring resources used to produce goods and services
• Labour is the measure of work done by humans to produce goods and services
• Capital is the money or wealth used to create goods and services
• Enterprise refers to the entrepreneurial skills and abilities that allow risks to be taken and profits to be earned

Individuals, firms and governments seeks to maximise economic benefits

Firms seek to maximise their profits

The government has four key economic objectives: to have full employment, stable prices, high and sustainable economic growth and a balance of payments equilibrium

All resources are scarce and therefore there needs to be choices about how they are utilised

Opportunity cost is the cost of the next best alternative

Production possibility frontiers show the range of possible combinations of goods in an economy, they allow you to assess the trade offs between the production of different goods

Value judgements are the basis of normative economics and they look at what should happen