Needs, resources and production

Primary needs keep us alive: food, water, shelter and clothing. Secondary needs make life better but are not needed to survive: education, health care, transport and communication. A community needs schools, clinics and roads; a country needs things like electricity, police and defence.

Nobody can satisfy all their wants, because resources are limited: that is scarcity. When a resource becomes scarcer, the price usually rises. Thandi uses her savings for a school trip instead of new takkies: the takkies are her opportunity cost.

What we produce is goods (things, like bread) and services (work done for someone, like a dentist visit). A producer makes goods or provides services; the consumer buys and uses them. A household is a consumer when it buys food and clothes, and a producer when its members work for a business (labour) or grow vegetables. Workers specialise in a factory, so work goes faster and better.

• Consumable goods are used up, like bread.
• Durable goods last a long time, like a fridge.
• Capital goods are used to make other goods, like an oven.

• Primary: mining, farming, fishing.
• Secondary: a furniture factory, a bread factory.
• Tertiary: a bank, a plumber, a shop.

In a subsistence economy people make just enough for their own needs. Public goods such as roads are provided by the state for everyone.