The nature and purpose of economic activity

• Purpose of economic activity

  To produce goods and services which satisfy consumer needs and wants
• Producing goods and services

  1. Using resources (inputs in the form of the factors of production)

  2. Producing outputs (the goods and services)
• Decisions economists have to make

  • What is to be produced?
  • How should it be produced?
  • Who will benefit from the goods and services produced?
• What is to be produced?


  The government and private sector have to decide what and how much of each good to produce, considering opportunity cost
• How should it be produced?

  Considering how the goods and services produced will be distributed, the rewards from each factor of production, and aiming to minimise costs and maximise profits through efficient production (labour intensive vs capital intensive)
• Who will benefit from the goods and services produced?

  Consumers who have purchasing power and are willing and able to pay the price charged