1.1.2 The Nature and Purpose of Economic Activity

The central purpose of economic activity is to produce goods and services to satisfy the needs and wants of consumers.

• Needs: Basic requirements for human survival, such as food, water, and shelter.
• Wants: Desires for goods and services that improve quality of life, such as entertainment, luxury items, and travel.

Fundamental Economic Decisions

Every economy must make fundamental decisions about:

• What to produce: Deciding which goods and services to produce based on consumer demand and resource availability.
• How to produce: Determining the methods of production, including the choice of technology and allocation of resources.
• For whom to produce: Deciding how goods and services will be distributed among the population, which can be influenced by income distribution, social policies, and market mechanisms.