Economic Systems: Definitions, Goods, Services, and Classification

Economics determines how goods and services are distributed in society.

Economic Systems

• Basis of how societies make economic decisions.

Goods and Services

• Goods: Physical items (e.g., cars, food).

• Services: Actions provided by one person for another (e.g., teaching, plumbing).

Three Fundamental Economic Questions

1. What should be produced?

   • Decide between physical goods or services.

2. How should these be produced?

   • Consider expertise needed and the marketplace.

3. For whom should they be produced?

   • Identify the target market.

Classification of Goods

• By Durability:

  • Durable Goods: Last >3 years (e.g., cars, appliances).

  • Nondurable Goods: Last <3 years (e.g., food, clothing).

• By Use:

  • Consumer Goods: Final use by consumers (e.g., school desks, cars).

  • Capital Goods: Used by businesses to make other goods (e.g., machinery).

Services and Value

• Services: Actions performed for others (e.g., HVAC, teaching).

• Value: Inherent worth of goods/services.