grow in a nature preserve in North Carolina.
BRITANNICA STUDENT ENCYCLOPEDIA Economics 99
people create wealth, how they use it,
and how different people get different
amounts of it.
Parts of an Economy
A society creates wealth by producing
goods and services. Goods include such
objects as apples, cars, and roads. Services
are things that people do for others,
such as gymnastics lessons, banking,
and dental care. People who buy these
goods and services are called consumers.
The process of creating the goods and
services is called production. There are
three major factors in production. The
first is land. Land can mean a large farm
or a tiny workshop. Land also includes
natural resources like oil and minerals.
The second factor of production is
labor, or people who work for pay.
Workers may be rewarded with wages,
or—if they own the business—with
profits. (Profits are the money that a
business keeps after paying costs.) The
third factor of production is capital.
This includes the tools, factories, and
offices that are used to make the goods
and services.
All the companies producing a particular
kind of product or service are grouped
together in what is known as an industry.
Industries that make things are
called manufacturing industries. Industries
that sell services are called service
industries.
Branches of Economics
There are several different branches of
economics. The study of individual consumers
and businesses is called microeconomics.
The study of how a whole
country’s economy works is called macroeconomics.
Microeconomics
Economists who study microeconomics
look at how consumers spend their
money. They try to explain why consumers
buy one product rather than
another. They also look at why companies
choose to produce one good or service
rather than another.
The amount consumers want to buy is
called demand. The amount companies
produce is called supply. Price strongly
affects supply and demand. If a manufacturer
charges a high price for a product,
usually it will sell few products. If it
reduces the price, usually it will sell
more products.
Macroeconomics
Economists who study macroeconomics
look at the value of all the goods and
The economics of supply and demand sets
the prices in a village market.
100 Economics BRITANNICA STUDENT ENCYCLOPEDIA
services that a country produces. In this
way, they measure a whole country’s
wealth.
Governments are interested in macroeconomics,
too. A government plays an
important role in its country’s economy.
When a government decides which
goods and services should be produced
and sold, the economy is said to be
planned. Countries with socialist or
Communist governments usually have
planned economies.
By contrast, when a government lets
companies and consumers decide what
will be produced, the economy is called
a free market. Countries with capitalist
governments have free-market economies.
But even capitalist governments
affect the economy. They do this by
raising or lowering taxes and changing
the amount banks can charge for loans.
These actions cause people to have more
or less money to spend on goods and
services.
#More to explore
Capitalism • Communism • Industry
• Manufacturing • Money • Socialism
Ecosystem
An ecosystem is a group of plants, animals,
and other living things that live in
the same surroundings. An ecosystem
also includes nonliving materials—for
example, water, rocks, soil, and sand. A
swamp, a prairie, an ocean, and a forest
are examples of ecosystems.
Each living thing in an ecosystem has a
role to play—as a producer, a consumer,
or a decomposer. Green plants are producers.
They make their own food
through a process called photosynthesis.
Animals, including humans, are consumers.
They eat, or consume, plants or
other animals. Bacteria and other living
things that cause decay are decomposers.
They break down the waste products
and dead tissue of plants and animals.
They return nutrients to the soil. The
way that producers, consumers, and
decomposers provide nutrients for one
another is called a food chain.
An ecosystem’s health depends on a
delicate balance among all its members
and the environment. If something disturbs
the balance, the ecosystem and all
its members may suffer. Natural things
such as a changing climate can disturb
ecosystems, as can human activities such
as polluting.
#More to explore
Environment • Food Chain • Living
Thing
A swan builds a nest in a wetland ecosystem
in England.
BRITANNICA STUDENT ENCYCLOPEDIA Ecosystem 101
Ecuador
Ecuador gets its name from the equator,
which passes through the northern part
of the country. Located in northwestern
South America, Ecuador straddles part
of the Andes Mountains and occupies
part of the Amazon River basin. The
capital city, Quito, stands on the lower
slopes of an old volcano.
Geography
Ecuador is bordered by Colombia, Peru,
and the Pacific Ocean. Its territory
includes the Galapagos Islands, which lie
to the west.
Along the coast the land is flat, with
tropical rain forest in the north and
desert in the south. Two ranges of the
Andes Mountains run from north to
south through central Ecuador. The
