What is the role and significance of goods and services in an economy?
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Answer:
Economics is important because it helps people understand how a variety of factors work with and against each other to control how resources such as labor and capital get used, and how inflation, supply, demand, interest rates and other factors determine how much you pay for goods and services.
Goods and services are the basis of economics. You produce goods that others would buy. Or you provide services that others would consume and pay you.
When you produce goods, you incur the cost of design, manufacturing, delivery and support (to keep it very simple), and you hope to sell your goods at a price that allows you to recover your costs and generate a profit on top of that.
When you provide services, you incur the cost of training and supporting tools and/or equipment you might need to perform this service. Others would hire you for your competence, or your tools, or both. For example, we might retain a CPA to help us keep our books and file tax returns. We are hiring them for their knowledge and competence. But when we hire a gardener, we need them for their time and the equipment they would bring.
The money you receive for your goods or services is determined by the agreement between the buyer and seller. They may agree to exchange money, or to barter others goods or services. For example, consider a dentist who is hiring a home contractor to manage an upgrade project. They may decide that the dentist will provide dental service instead of paying cash.
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