Basic Economic Principles Chapter Notes | Social Studies for Grade 7 PDF Download

Introduction

Economics is all about how people make choices to use resources like money, time, and goods. In this chapter, we will learn the basic ideas of economics that help us understand how individuals, families, and communities make decisions. We will explore what economics means, how costs and benefits affect choices, what opportunity cost is, how trade and specialization work, and what a market is. These ideas help us see how people meet their needs and wants every day.

What is Economics?

Economics is the study of how people choose to use their resources, like money, time, and materials.

• It looks at how people decide what to buy, make, or sell.
• Economics helps us understand how we meet our needs, like food and clothes, and our wants, like toys or games.
  • Needs are things we must have to live, like water, food, and a place to live.
  • Wants are things we would like to have but can live without, like ice cream or a new bike.
  • Resources are things we use to make or get what we need and want, like money, land, or workers.
• Economics shows how people trade goods and services to get what they need or want.
  • Goods are things we can touch, like apples or pencils.
  • Services are jobs people do for others, like a haircut or fixing a car.
• Economics also looks at how people work together in communities to share resources and help each other.

Costs and Benefits

• Every choice we make has a cost and a benefit.
• A cost is what you give up or spend when you make a choice, like money or time.
• A benefit is what you gain from making a choice, like getting something you need or enjoy.
  • For example, if you buy a toy, the cost is the money you spend, and the benefit is the fun you have playing with it.
• People think about costs and benefits to make good decisions.
• If the benefit is bigger than the cost, the choice might be a good one.
  • For example, spending $5 on a book is a good choice if you enjoy reading it for many hours.
• Sometimes, the cost is too high for the benefit, so we might choose something else.
• Businesses also think about costs and benefits when they decide what to make or sell.
• Thinking about costs and benefits helps us use our resources wisely.

Opportunity Cost

• Opportunity cost is what you give up when you choose one thing instead of another.
• Every time you make a choice, you lose the chance to do something else with your time or money.
  • For example, if you spend $10 on a movie ticket, the opportunity cost is what you could have bought with that $10, like a book or a snack.
• If you spend an hour playing a game, the opportunity cost is the hour you could have spent doing homework or riding your bike.
• Opportunity cost helps us think about what we are giving up when we make a choice.
• It’s not just about money—it can be about time, fun, or anything else you value.
• People try to pick the choice with the lowest opportunity cost and the biggest benefit.
  • For example, if you really want a new toy but also need new shoes, you might choose shoes because they are more important, and the opportunity cost of not getting the toy is okay.
• Understanding opportunity cost helps us make better decisions by thinking about what we might miss out on.
• Even kids make choices with opportunity costs, like deciding between playing outside or watching TV.

Trade and Specialization

• Trade is when people or groups exchange goods or services.
• Trade happens because people have different things and want different things.
  • For example, you might trade a pencil for a snack with a friend.
  • Countries trade things like food, clothes, or cars with each other.
• Trade helps people get things they need or want but don’t have.
• Specialization is when people or businesses focus on making one thing really well.
  • For example, a farmer might specialize in growing apples instead of growing many crops.
  • A factory might specialize in making shoes instead of clothes and toys.
• Specialization makes people better at what they do because they practice it a lot.
• Specialization and trade work together:
  • If you specialize in making something, you can trade it for other things you need.
    • For example, the apple farmer can trade apples for wheat from another farmer.
• Trade and specialization help people and countries work together to meet everyone’s needs.

What is a Market?

• A market is a place or system where people buy and sell goods and services.
• Markets can be physical or online:
  • A physical market is like a store or a farmers’ market where people go to shop.
  • An online market is like a website where people buy things, such as clothes or games.
• In a market, buyers are people who want to purchase goods or services.
• Sellers are people or businesses who offer goods or services for sale.
• Markets work because of supply and demand:
  • Supply is how much of a good or service sellers have to offer.
  • Demand is how much buyers want to purchase.
    • For example, if many people want apples, the demand is high, and the price might go up.
  • If there are too many apples, the supply is high, and the price might go down.
• Markets help people get what they need by connecting buyers and sellers.
• Markets are important because they help decide prices and make sure goods and services are available.