Notes

The most basic economic activity is production. Production is the process of using human labor and man-made devices to turn natural resources into goods and services. In other words: making things. Production enables people to satisfy most of their wants and needs.

The flip side of production is consumption, or the use of the goods and services produced. At its most basic, economic activity means using labor and resources to produce goods and services that humans consume.

An economic system consists of all the economic activities for one area. One of the functions of a national government is to set the basic terms for how the economic system should work — what goods and services can be exchanged, who can exchange, and what are the terms of the exchange. For example, can workers combine to negotiate a collective wage package? Can individuals own farmland? Can a corporation avoid regulations that affect individual investors?

Because the economic system is an important part of every country, the connection between governments and economies is very important.