Economics

People use goods and services to meet their needs and wants. A good is something you can touch or hold in your hands. A service is a job you pay someone to do for you. Resources are things people use to make goods and services. Resources include things such as land, tools, and the work that people do.

The word economics comes from another word meaning "someone in charge of running a home." Someone who runs a home thinks about how to meet needs and wants.

Scarce, or limited, resources mean people face trade-offs. A trade-off is when you have to give up some amount of one thing to get something else you want.

Trade-offs are choices between things you 

want or need. Whatever you give up when you

make one of these choices is called an opportunity cost.

Economics exists because people have unlimited wants but limited resources. In other words, there are not enough resources to meet all of people's wants. This problem is called scarcity.

Scarcity means people must make choices. Choices have consequences, or results. These consequences are often spread out over time. Some consequences happen in the present, or right away. Others happen further in the future.

Incentives are consequences that encourage you to act a certain way. A positive incentive is a reward. It gives benefits. A negative incentive is a penalty. It has costs.

People's choices are influenced by incentives. You can often tell how people will respond to incentives, because people tend to look out for their self-interest. In other words, they seek things they want or need and avoid costs when possible.

People's choices make up an economy. An economy is the way people in a society use their resources to meet their needs and wants. It's a system for making and exchanging goods and services.

People who study economies are called economists. They look for patterns in the choices people make. They also think about the results of those choices.

Economists use models when studying the economy.

Economists use data to make and test their models. They compare data sets, look for relationships between them, and draw conclusions about how the economy works.

One of the most important models in economics is the supply and demand model. In this model, prices are determined by how much of a good or service people are willing to make and sell and by how much of it people want to buy.

 A recession is a time when the economy is shrinking. The Great Recession 

began in the U.S when many people could

not pay back money they had borrowed to buy houses.