Grade 7 Lesson 1: #Economy
We have all heard the term “Economy” in several discussions with our friends or families. We have heard that the “Economy is strong”. Or, like more recently, that “The economy is really bad”. But what does it really mean? At the most basic level, the economy is the part of our society that deals with the creation and use of wealth.
Wealth is not just money. A society creates wealth by producing goods and services. Goods include such objects as apples, cars, and roads. Services are things that people do for others—for example, gymnastics lessons, banking, and dental care. People who buy these goods and services are called consumers.
The process of creating goods and services is called production. There are three major factors in production. The first is land. Land can mean a large farm or a tiny workshop. The land also includes natural resources like oil and minerals. The second factor of production is labor or people who work for pay. Workers may be rewarded with wages, or—if they own the business—with profits. The third factor of production is capital. This includes the tools, factories, and offices that are used to make the goods and services.
All the companies producing a particular kind of product or service are grouped in what is known as an industry. Industries that make things are called manufacturing industries. Industries that sell services are called service industries.
Producers of similar goods or similar services compete with each other for consumers. The producers and consumers in an industry together form a market. The simplest example of a market that we all should be familiar with is our local supermarket. There you find a lot of products available for sale. These products are created by producers. You also find a lot of shoppers like yourself. These are the consumers. The concept of a market is a very important one when it comes to understanding key economic concepts.
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