1. Economic goods and services

All people settle into two major economic roles: consumer and producer. In the role of a consumer, a person buys goods and services for personal use, not for sale. Consumer goods are products, such as food, clothing, and cars, that satisfy people's economic needs or wants. There are 2 categories of goods: perishable goods and goods last longer.

Services are actions, such as cleaning or teaching. Services are used up at the time they are provided. In order to produce something a person must first have right resources.

Resources are the materials from which goods and services are made. There are three kinds of resources: human (people), natural (raw materials), and capital resources (capital, or the money or property).

Scarcity is the situation when demand for a good, service, or resource is greater than supply. Every group of people, individuals and nations must solve basic economic problems of daily living: What goods and services will be produced? How will they be produced? Who will get them? How much will be produced for now and how much for the future?

2. Opportunity costs

Opportunities are chances to improve your situation. Opportunities may cost you something. If you buy a car, you cannot spend the same money for a stereo.

All production involves a cost. This cost is not counted simply in terms of money but also in terms of resources used. The various resources used in producing a good or a service are the real costs of that product.

Production requires natural, human and capital resources. Since resources are limited and human wants are unlimited, people and societies must make choices about what they want most. Each choice involves costs. The value of time, money, goods and services given up in making a choice is called opportunity cost.

When people make a choice between two possible uses of their resources, they are making a tradeoff between them. To make choices that best satisfy human wants, people must be aware of all the tradeoffs. Then, society will understand the true costs of making one decision rather than another, and can make the decision that best fits its values and goals.

One of the most important choices a society makes is between producing capital goods and producing consumer goods. If a nation increases its production of consumer goods, its people will live better lives today. However, if a nation increases its production of capital goods, its people may live better in the future.

3. Utility and prices

According to our basic needs and individual wants we require different kinds of commodities. Commodities of different kinds satisfy our wants in different ways. This characteristic of satisfying a want is known in economics as "utility". It is related to the number of factors and a utility change is concerned with the consumer's relation to a commodity.

Utility should not be confused with usefulness. Utility varies between in relation to individual tastes, to geographical and in relation to time. Utility is related to our decisions about priorities in production and to the quantity, which is available to the consumer.

The marginal utility is situation, when the financial sacrifice is greater than the satisfaction of using commodity. The marginal utility has changed. If the price had been higher, consumer might have bought fewer commodities; if the price had been lower, consumer might have bought more.

The Law of Diminishing Marginal Utility is situation, when the consumer's desire for a commodity tends to diminish as he buys more units of it.

The interaction of buyers and sellers determines the price for goods and services. If the price is too low, a shortage will develop, thereby driving up the price. If the price is too high, a surplus will develop and move the item's price down. A society may interfere in markets prices by means of price controls and ration stamps.

At equilibrium price the amount producers will supply and the amount consumers will buy are the same.