Economics Facts For Kids
Wondering how to explain economics to a kid?
The simplest way to understand economics is to think of it as a way for a community to always have the things needed to survive and not run out and face starvation.
This depends on some people to make products, exchange those products with others and to make it worthwhile for the producers to continue to make the products everyone in the community needs.
Two important terms in economics are ‘goods’ and ‘services’.
Types of Economics
In today’s world, economics has been broken down into two main types: microeconomics and macroeconomics.
Microeconomics
This is concerned with how individuals produce and consume products, how labor is divided, and how individuals cooperate with each other.
Microeconomics looks at the supply and demand for and costs of goods.
Macroeconomics
Macroeconomics looks at the ability of the larger community, region or the nation to produce products efficiently so that everyone has enough of what they need to live comfortably.
Macroeconomics considers foreign trade, unemployment rates, inflation, and interest rates. It is the study of how production of goods affects expansion, recessions, and depressions.
The main problem is that it is human nature to always want more and more products, but not every nation can provide the amount of goods people want.
What nations are afraid of is that the population explosion in many countries will be greater than the food supply.
Definitions
Goods – physical items that are bought and sold; they are manufactured, grown, taken out of the earth or taken off the earth and out of the sea.
Services – are actions that someone provides for another or pays someone to do for them. These can be teaching, providing medical care, providing transportation or banking services, etc.
Expansion – The economy of an area is growing and becoming self-sufficient. This raises the standard of living for those in the area. The people have more than they need to sustain life.
Recession – It is a time when there is a decline in production that lasts for a few months and people are afraid to spend money.
This can be triggered by a natural disaster, a drop in stock values, or perhaps a pandemic.
Governments usually respond by increasing available money, decreasing interest rates, or increasing government spending.
Depression – This is an extended recession. This is a severe decrease in the demand for goods and services which can cause businesses to lay off their workers and even close.
Wages drop dramatically and unemployment skyrockets. The last North American depression lasted for years.
Quiz Time – Test Your Knowledge of Economics!
Questions
In one sentence describe microeconomics.
In one sentence describe macroeconomics.
What are goods? Give three examples.
What are services? Give three examples.
What is a depression?
Answers
Microeconomics is how individuals produce and consume products, how labor is divided, and how individuals cooperate with each other.
Macroeconomics is the ability of the larger community, region or the nation to produce products efficiently so that everyone has enough of what they need to live comfortably.
Goods are things that people produce, buy, and use – such as oil, beef, and fish.
Services are what people do for each other, such as teach, provide care, and provide rides.
A depression is a prolonged recession where people are laid off work, businesses close, wages drop, and unemployment increases.